Swiss announce landmark US tax deal

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Switzerland has announced a landmark deal with the US government to end a long-running dispute over banks that help US tax evaders

The news comes following increased pressure on Switzerland due to series of corporate scandals. Swiss bank UBS was fined a record £160m over its handling of the Libor interbank lending rate. And the country's oldest private bank, shut its doors after pleading guilty in January to helping wealthy Americans avoid tax.

The agreement creates four categories of banks for the purpose of dealing with the US Department of Justice. The first group will not be able to take advantage of the new deal as it does not cover the 14 Swiss banks and Swiss branches of international banks that are currently under criminal investigation by the United States authorities, including Credit Suisse. It concentrates on the 300 other Swiss banks not yet under investigation.

The programme requires Swiss banks to agree to pay substantial penalties, ensure complete disclosure of their cross-border activities and provide detailed information on in which US taxpayers have a direct or indirect interest.

In a joint press release the governments said, “The chosen solution defines the framework for Swiss banks’ cooperation with the US authorities. It respects Switzerland’s legal system and sovereignty.”

It will bring “tax dollars back to the US Treasury from across the globe,” said Eric Holder, US attorney general.

“This programme will significantly enhance the Justice Department’s ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States,” he said.

Deputy attorney general James M. Cole, said, “Now is the time for all U.S. taxpayers who hid behind Swiss bank secrecy laws or have undeclared offshore accounts in other foreign countries to come forward and resolve their outstanding tax issues with the United States.”

The Swiss Bankers Association (SBA) were less enthusiastic in their response, “The programme brings with it painful consequences for the banks in Switzerland," the body said.

"The fines in particular are at the upper end of legally acceptable and economically bearable levels. It is, however, the sole remaining solution for enabling the banks to resolve the legal problems with the US conclusively, and for creating legal certainty.”

The SBA also mentioned "certain ambiguities in the program" which it said need to be discussed further. 

Swiss tax affairs have also been under scrutiny after the UK announced it was cracking down on British nationals who hid money in offshore bank accounts there.

In January, the UK has received £340m from the Swiss government in repatriated taxes from British taxpayers with Swiss bank accounts.

The money is the first instalment from the tax agreement struck between the two countries in 2011, which means UK taxpayers with Swiss bank accounts are liable to pay withholding tax on income and gains.

Raymond Doherty

 

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