US takes tough line on Swiss tax deals

US Deputy Attorney General James Cole has asked the Swiss government for detailed information on its citizens who use bank accounts in the country to dodge tax, threatening fines if it doesn't. His stance signals a much tougher line than that adopted by the UK and German governments recently.
The request came after Swiss State Secretary Michael Ambühl, buoyed by the recent deals with the UK and Germany (see story linked below), wrote to Cole suggesting a new instrument to the 2009 Double Tax Agreement (DTA) which would let the US submit group requests without receiving names in return.

Tax Justice Network

The correspondence was revealed by the Swiss German weekly SonntagsZeitung and picked up by the Tax Justice Network. The paper's story says that Cole replied that the proposal could be tested, but only if the following conditions were met;

  • Provision of comprehensive information about US citizens and their assets in 10 Swiss banks
  • Revelation of the quantity structure of US assets held in Swiss banks
  • Ability to use judicial orders to enforce disclosure of customer information at the 10 banks
  • Negotiation of individual deals with the 10 banks
  • A group agreement with any remaining banks disclosing "certain account information".

The paper says the request has created "a sense of alarm among the Swiss banking community". The fine of $780m paid by UBS to the US Justice Department over the sale of offshore banking services to wealthy Americans, plus the accompanying revelation of 19,000 names, is being remembered.

Reveal names

Bloomberg reports sources as saying that the banks may face fines of up to $2.5bn this time, and the Financial Times comments that the move represents "a significant increasing of the pressure on Switzerland to again bend its once watertight bank secrecy rules and deliver further client names".

Tax Justice Network says: "The U.S. has taken the aggressive (and correct) approach: obtaining initial data, then making tax evaders and their pinstripe intermediaries feel the heat, do deals with a few of them in exchange for more data, then spread the investigation further. There's no telling where this might stop." And it asks: "Why have Germany and the UK been so feeble?

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