Swiss to Block UBS From Providing Data to U.S.

by Dollars and Sense

From yesterday's New York Times, an article about the U.B.S. tax case. For those of us who are dying to have a peek at the names of the 52,000 rich Americans who are evading taxes by putting their money in the Swiss bank, it looks as if we may have to wait.

The funniest bit of this article is toward the end, where it says that "The Swiss agreed in March to abide by Article 26 of the Organization for Economic Cooperation and Development's tax convention, which requires national tax authorities to exchange information on request if there is probable cause to suspect tax evasion." But in the previous paragraph it had said that "Switzerland distinguishes between tax fraud and tax evasion, and does not consider tax evasion to be a crime." So they are solemnly pledging "to exchange information on request if there is probable cause to suspect tax evasion," but they don't regard tax evasion as a crime. Hmm... —cs

For more on tax havens, see our May/June cover article.

Swiss Vow to Block UBS From Providing Data to U.S.

By DAVID JOLLY
Published: July 8, 2009

PARIS — The Swiss government said Wednesday that it was prepared to seize U.B.S. client data rather than allow the bank to hand it over to the United States to settle a tax case.

U.B.S. has refused a demand from U.S. authorities that it turn over the names of 52,000 American clients, arguing that to do so would be illegal under Swiss banking secrecy laws and would open it to prosecution at home. The U.S. Justice Department in February sued U.B.S., saying it suspected the bank of helping wealthy Americans hide billions of dollars in secret offshore accounts.

"Switzerland makes it perfectly clear that Swiss law prohibits U.B.S. from complying with a possible order by the court in Miami to hand over the client information," the Swiss Department of Justice and Police said Wednesday in a statement on its Web site, a day after it made a filing to the same effect in the U.S. District Court in Miami. Therefore, "all the necessary measures should be taken to prevent U.B.S. from handing over the information on the 52,000 account holders demanded in the U.S. civil proceeding," it added.

The Swiss government will issue an order explicitly prohibiting U.B.S. from handing over client information "if circumstances require," it said.

Serge Steiner, a U.B.S. spokesman in Zurich, said it has always been U.B.S.'s position that divulging the client data would be a breach of Swiss law, and "the issue should be discussed by the two friendly governments.'' The bank, he added, is "always open to an appropriate solution.''

U.B.S., the largest Swiss bank, is under great pressure to reach an agreement. The bank has already paid $780 million and turned over the names of more than 250 clients to avoid prosecution on allegations that it defrauded the Internal Revenue Service. Its soured investments, many on American subprime mortgages, have cost it $53 billion in write-downs, sending it to taxpayers for a bailout. U.B.S. officials were not immediately available for comment Wednesday.

"On the one side you have the U.S. government wanting to get back some missing taxes and on the other you have a bank that is admitting some responsibility," said Nicolas Michellod, an analyst in Zurich with Celent, a financial research firm. "Eventually, I'm sure we'll see U.B.S. paying a fine."

U.B.S. last month raised about $3.5 billion in new capital, and Mr. Michellod suggested the bank might have been provisioning for just such an eventuality.

Doris Leuthard, the Swiss economy minister, said Tuesday in Washington that U.B.S. had made mistakes and would have to "pay a price" to reach a deal.

The dispute, which has strained relations between the United States and Switzerland, takes place amid wider efforts by countries including France, Germany and the United States to increase transparency in tax havens like the Channel and Jersey Islands, Switzerland and Luxembourg.

Switzerland distinguishes between tax fraud and tax evasion, and does not consider tax evasion to be a crime.

The Swiss agreed in March to abide by Article 26 of the Organization for Economic Cooperation and Development's tax convention, which requires national tax authorities to exchange information on request if there is probable cause to suspect tax evasion. But the government has also said that it "has no intention of relinquishing bank secrecy."

In Paris, the O.E.C.D. said Wednesday that one of those countries, Luxembourg, had now "substantially implemented the internationally agreed standard" of transparency in the exchange of tax information. While Luxembourg's work is not finished, Angel Gurría, the organization's secretary general said, "The process is working and I look forward to other countries following the example that Luxembourg has set."

Read the original article.

Labels: OECD, Switzerland, tax evasion, tax fraud, tax havens, UBS

 

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7/09/2009 10:22:00 AM