FINACIAL TIMES; May 29, 2013 7:58 pm
Switzerland outlines plan to relax bank secrecy laws
By James Shotter in Zürich
Switzerland has taken a decisive step to resolve its dispute with the US over tax evasion unveiling plans to relax its once untouchable bank secrecy laws to allow banks to make individual settlements with the US over their role in helping Americans evade taxes.
Since Switzerland's biggest lender, UBS, admitted in 2009 it had helped thousands of clients avoid paying US taxes, American authorities have been investigating other Swiss banks they believe may have offered similar services, including Julius Baer and Credit Suisse.
Until now, however, Switzerland's bank secrecy laws have prevented its banks from complying with American requests for information about their activities in the US, stymieing any settlements.Switzerland's move comes as curbing tax avoidance and evasion by individuals and companies has risen on the international policy agenda as governments try to rake in as much revenue as they can given tough fiscal positions.
US authorities last year intensified pressure on Switzerland over this by indicting Wegelin, Switzerland's oldest private bank on tax charges.
After pleading guilty in January to aiding US citizens from paying taxes on $1.2bn held offshore and paying $57.8m to the US government, the 270-year-old bank had to close.In a bid to prevent other banks suffering a similar fate, the Swiss government on Wednesday outlined a draft law to enable Swiss banks to sidestep stringent bank secrecy laws and reach individual settlements with US authorities.
Swiss banks will for one year be able to provide information about the activities of their staff and clients in the US. They will still not be allowed to provide information on the identities of clients. But, armed with the new information about client activity, the US will be able to make more precise requests for information about individuals within the framework of the existing double tax treaty between Bern and Washington.Banks that choose to enter into such deals will be protected from further prosecution for their past activities in the US, but are also likely to face large fines. Estimates for the overall cost for the Swiss financial sector reach as high as SFr7bn to SFr10bn.
Eveline Widmer-Schlumpf, Switzerland's finance minister, conceded the US had put Switzerland under enormous pressure to reach a deal, but said the result was a "pragmatic" solution. "It helps banks out of the situation they are in," she said. "It should make it possible for banks to focus on their core business again, which is providing good services."
The Swiss Bankers' Association said it was "positive" that banks now had a chance to deal conclusively with the past, but that it was "astonished" that the government had given no details of settlements Swiss banks would have to sign.
Credit Suisse and Zürcher Kantonal Bank publicly welcomed the proposal, but in private, other bankers slammed the government for caving in to American pressure.
Ms Widmer Schlumpf insisted that in conjunction with implementing Fatca – extraterritorial legislation that requires foreign banks automatically to provide information about the offshore assets of US citizens – the deal would help ensure Swiss banks had a more stable future. In February, the US and Switzerland reached an agreement on the implementation of Fatca rules.
The new law unveiled on Wednesday must now be debated by Switzerland's parliament, which is due to sit in June. Opposition in parliament could still sink the deal, but if approved, it will enter into force immediately.The US Department of Justice, Department of Treasury and Internal Revenue Service declined to comment.
Additional reporting by Kara Scannell and James Politi
Switzerland outlines plan to relax bank secrecy laws
By James Shotter in Zürich
Switzerland has taken a decisive step to resolve its dispute with the US over tax evasion unveiling plans to relax its once untouchable bank secrecy laws to allow banks to make individual settlements with the US over their role in helping Americans evade taxes.
Since Switzerland's biggest lender, UBS, admitted in 2009 it had helped thousands of clients avoid paying US taxes, American authorities have been investigating other Swiss banks they believe may have offered similar services, including Julius Baer and Credit Suisse.
Until now, however, Switzerland's bank secrecy laws have prevented its banks from complying with American requests for information about their activities in the US, stymieing any settlements.Switzerland's move comes as curbing tax avoidance and evasion by individuals and companies has risen on the international policy agenda as governments try to rake in as much revenue as they can given tough fiscal positions.
US authorities last year intensified pressure on Switzerland over this by indicting Wegelin, Switzerland's oldest private bank on tax charges.
After pleading guilty in January to aiding US citizens from paying taxes on $1.2bn held offshore and paying $57.8m to the US government, the 270-year-old bank had to close.In a bid to prevent other banks suffering a similar fate, the Swiss government on Wednesday outlined a draft law to enable Swiss banks to sidestep stringent bank secrecy laws and reach individual settlements with US authorities.
Swiss banks will for one year be able to provide information about the activities of their staff and clients in the US. They will still not be allowed to provide information on the identities of clients. But, armed with the new information about client activity, the US will be able to make more precise requests for information about individuals within the framework of the existing double tax treaty between Bern and Washington.Banks that choose to enter into such deals will be protected from further prosecution for their past activities in the US, but are also likely to face large fines. Estimates for the overall cost for the Swiss financial sector reach as high as SFr7bn to SFr10bn.
Eveline Widmer-Schlumpf, Switzerland's finance minister, conceded the US had put Switzerland under enormous pressure to reach a deal, but said the result was a "pragmatic" solution. "It helps banks out of the situation they are in," she said. "It should make it possible for banks to focus on their core business again, which is providing good services."
The Swiss Bankers' Association said it was "positive" that banks now had a chance to deal conclusively with the past, but that it was "astonished" that the government had given no details of settlements Swiss banks would have to sign.
Credit Suisse and Zürcher Kantonal Bank publicly welcomed the proposal, but in private, other bankers slammed the government for caving in to American pressure.
Ms Widmer Schlumpf insisted that in conjunction with implementing Fatca – extraterritorial legislation that requires foreign banks automatically to provide information about the offshore assets of US citizens – the deal would help ensure Swiss banks had a more stable future. In February, the US and Switzerland reached an agreement on the implementation of Fatca rules.
The new law unveiled on Wednesday must now be debated by Switzerland's parliament, which is due to sit in June. Opposition in parliament could still sink the deal, but if approved, it will enter into force immediately.The US Department of Justice, Department of Treasury and Internal Revenue Service declined to comment.
Additional reporting by Kara Scannell and James Politi