Swiss to help IRS identify secret UBS accounts in tax probe
The Swiss parliament approved a deal Thursday to help the Internal Revenue Service obtain the names of Americans with secret accounts at Switzerland's largest bank.
The approval averted a renewed conflict between the U.S. and Swiss governments over bank secrecy. If the deal had collapsed, Swiss banking giant UBS faced the threat of potentially crippling U.S. legal action.
Instead, the breakthrough paves the way for the Swiss government to turn over the names and account details of as many as 4,450 U.S. clients of UBS suspected of using undeclared accounts to hide income and evade taxes.
The fate of the international agreement was in limbo during the past week after the lower house of parliament initially rejected the deal and tried to put it to a national referendum, which could have delayed resolution until next year. Lawmakers agreed Thursday not to seek the referendum.
In ratifying the deal, the parliament in effect gave its blessing to a weakening of Swiss bank secrecy standards. The issue stirred deep passions in Switzerland, where bank secrecy is not just a tradition but one of the keys to the success of the nation's economically important banking industry. The promise of privacy has helped Switzerland attract deposits from around the world. The U.S. government's pursuit of tax dodgers has posed a threat to that system.
UBS acknowledged last year that it had defrauded the U.S. government by helping Americans hide money from the IRS. To avert criminal prosecution, it agreed to pay the U.S. government $780 million.
Separately, the U.S. government pursued a lawsuit against UBS, trying to compel the bank to hand over details on about 52,000 accounts. UBS said its hands were tied by Swiss law, and the Swiss government stepped in to negotiate a solution.
The governments reached an agreement last August calling for the Swiss to process a request for details on 4,450 accounts. The deal meant that the Swiss would consider the request under a more accommodating interpretation of national law.
Then, early this year, after that process had begun, a Swiss court ruled that the deal violated national law. The executive branch of the Swiss government asked the parliament to salvage the agreement by ratifying it.
The Swiss government has already turned over details on about 500 UBS clients, the Swiss justice department said Thursday.
Under the agreement, the Swiss tax authority must decide by August whether the U.S. government is entitled to receive information about each of the 4,450 accounts. Account holders will be able to appeal those decisions in Switzerland.