A proposal by French President Jacques Chirac to tax countries which retain banking secrecy has caused controversy in Switzerland.

The Swiss finance minister and banks attacked the suggestion, while non-governmental organisations welcomed it.

At the opening of the World Economic Forum meeting in Davos on Wednesday, Chirac put forward a set of “experimental measures” to finance the fight against Aids. He called for at least $10 billion (SFr12 billion) to be spent annually on combating the disease instead of the $6 billion currently spent.

Among the measures was a proposal that countries which retain banking secrecy – including Switzerland – be charged for income lost through tax evasion. He also called for a tax on international financial transactions.

Swiss Finance Minister Hans-Rudolf Merz said Chirac had no right to interfere in what was an internal matter.

“It's an interference in the internal policy of our country,” Merz told the media.

“The French president has the right to express himself about these issues, but he has to accept the fact that we have our own policy rules and a clear policy on banking secrecy. These issues can be raised in bilateral negotiations at which we will continue to defend banking secrecy.”

“Bizarre”

Swiss banks were also critical of the “bizarre” suggestion and denied that banking secrecy was responsible for a flight of capital.

Michel Dérobert, general secretary of the Swiss Private Bankers’ Association said Chirac had “confused separate issues”.

Swiss Bankers Association spokesman James Nason went further in his criticism:

"The idea is rather bizarre and has a ring of Saint-Simon and early 19th century utopian socialism about it," he told swissinfo.

"Tax evasion and capital flight are symptoms of internal problems in a country and are not caused by the existence of banks in, for example, Monaco or Switzerland.

“A far better idea would be if the oh-so-pious French were to impose a tax on nasty tin-pot dictators who purchase real estate on the Côte d'Azur, topped up with a tax on French bank loans and arms sales to countries with brutally repressive regimes."

NGO approval

But Swiss NGOs welcomed Chirac’s ideas as a sign that politicians were taking up the ideas of opponents of globalisation.

“It’s a very good idea,” commented Andreas Missbach of the Berne Declaration. He said that countries like Switzerland that had banking secrecy swallowed up the tax money of other countries, and it made complete sense to impose a special tax on them.

The Tax Justice Network said many multinationals managed their business in such a way that they avoided paying taxes in the countries in which they operated.

According to the NGO, this tax evasion costs developing countries around $50 billion a year.

swissinfo with agencies