Money Matters, Simplified.
Swiss ruling halts UBS handing over tax evasion data to U.S.
by Jamie Anderson - January 24, 2010 - comments
A client of Swiss bank UBS won an appeal to prevent her account data from being given to the United States as part of a U.S. probe into possible tax evasion. The question whether the Swiss-U.S. agreement reached last year is in danger now is an open one.
Berne, Switzerland, January 24 -- The see-saw battle between Swiss bank UBS (UBS.N) and the tax authorities in the United States that was finally resolved in the court has taken another twist.
In a landmark judgment that may well jeopardize the settlement between the two warring parties, a Swiss court in Berne ruled in favor of a U.S. client of the bank.
"This is a major event," said Florida tax lawyer William M. Sharp Sr., who is representing UBS clients.
Social Democratic Party lawmaker Simonetta Sommaruga averred that the ruling has raised "many questions" and could put Switzerland in "an uncomfortable position."
The client had appealed against the bank handing over his data to U.S. tax authorities. In addition to this one, 25 similar cases are still pending before various courts.
Bryan Skarlatos, an attorney for wealthy clients said, "The Swiss courts are now one-upping the U.S. The question is, how will the UBS commitment to turn over 4,450 names be fulfilled if these types of taxpayers cannot be turned over under the treaty."
Cross-country agreement last year
It was only last year that the long-running dispute between Swiss authorities and the U.S. Internal Revenue Service (IRS) pertaining to UBS’s U.S. clients suspected of using secret bank accounts to avoid tax was settled.
The United States had accused UBS of hiding nearly $15 billion in assets of U.S. customers.
Under the terms of that settlement, the Swiss bank was to divulge names of 4,450 such suspected American tax evaders to the IRS.
After the aforementioned agreement was reached, scores of U.S. taxpayers, scared of penal action, had come forward and admitted to having foreign accounts under an IRS amnesty program.
The agreement entailed that the names of the UBS clients would first be turned over to the Swiss tax administration, which would hand over these names to the U.S authorities after a thorough review.
The UBS clients were, however, given the chance to appeal under the agreement.
Swiss-U.S. agreement in jeopardy
The present ruling in Berne, in effect, reverses a huge plank of the previous settlement. It would also embolden tax evaders who have not owned up to their illegitimate action and hope to avoid detection.
The IRS said Friday that the tax agency believed the Swiss government would honor the agreement.
The Swiss government said in a statement that it will "decide next Wednesday in what way the enforcement of Switzerland's and the U.S.'s agreement can be guaranteed."