Reports that Switzerland and the United States will announce a new deal next month to end their tax evasion row have been met with some scepticism.
Rumours are circulating that Swiss and European banks will be invited to join a voluntary disclosure scheme that would inflict fines and the handover of client data in return for the US authorities dropping legal action.
The US tax collection agency, the Internal revenue Service (IRS), scored a direct hit on UBS two years ago when it forced the Swiss bank to pay a $780 million fine and pass on files of 4,450 clients.
The IRS is now aiming further broadsides at other Swiss institutions such as Credit Suisse, Julius Bär and cantonal banks.
Reuters news agency announced on Thursday that Swiss and US negotiators could announce a new catch-all disclosure scheme in July that promises to avoid the highly publicized legal proceedings that caused such reputational damage to UBS.
Mario Tuor, spokesman at the state secretariat for international financial matters, would not comment directly on the report. He did confirm that talks were ongoing on implementing the US Foreign Account Tax Compliance Act (Fatca) that would compel foreign banks to register the accounts of US citizens.
“The possibility of resolving past fiscal problems has been discussed, but there is nothing concrete,” he told swissinfo.ch.
Switzerland has also negotiated a revised double taxation agreement with the US that has yet to be ratified by both sides.
It is unclear where the reported bank disclosure scheme fits into the negotiations. Reports have quoted unnamed IRS officials, but have yet to be officially confirmed.
The deal that Switzerland agreed with the US to hand over UBS client data does contain a declaration that the Swiss would “review and process additional requests for information…if they are based on the pattern and facts and circumstances that are equivalent to those of the UBS case.”
The Swiss parliament eventually passed the UBS deal last year, but not without significant opposition and a serious challenge from the courts.
Swiss financial legal expert Carlo Lombardini has doubts that politicians would be so keen to sign off another treaty that could lead to a further erosion of banking secrecy.
“UBS was a very flagrant case and even then the treaty was heavily criticised,” he told swissinfo.ch. “Switzerland cannot simply go on paying out fines and passing on client data. That would leave the door open for others to milk the country.”
Such a deal would also contradict ongoing negotiations between Switzerland and other countries to resolve tax evasion legacy issues.
The Swiss authorities hope to conclude unique treaties by the end of this year with Germany and Britain that would sidestep the need for client data transfer by paying out withholding taxes on undeclared accounts.
Big and small sticks
US tax lawyer Asher Rubinstein said a deal to hand more information would be a major victory for the US administration.
“This would free up significant resources for both the IRS and the Department of Justice that are currently being used to investigate bankers and US citizens,” he told swissinfo.ch.
Those investigations have already seen charges laid against four current and former Credit Suisse bankers while a former employee of the now defunct Neue Zürcher bank has been indicted in the US.
The size of Credit Suisse’s operations in the US would make it a prime candidate to take up the offer of disclosure to avoid prosecution, according to Rubinstein. Like UBS, Credit Suisse has many offices, staff and assets on US soil.
But there would be less sense in smaller Swiss institutions, such as cantonal banks, to sign up to the rumoured treaty.
“The advantage to such a deal would be to end legal prosecution quickly without additional negative publicity that would result in the flight of additional client assets,” he told swissinfo.ch.
“But I do not know why smaller banks, with limited or no presence in the US, would sign up to this. The IRS is able to wield a very big stick against banks such as Credit Suisse, because it could withdraw their license to operate. That stick is considerably smaller for the cantonal banks.”
Banking secrecy was enshrined in Swiss law in 1934. Switzerland has been under continuous attack since the outbreak of the financial crisis for helping foreign tax evaders hide their assets.
The OECD placed Switzerland on a “grey list” of uncooperative tax havens in April 2009.
The Swiss were removed from the list six months later after renegotiating several double taxation treaties. In February 2011, the Swiss government relaxed the terms of legal assistance further but still refused to automatically transfer information to tax investigators without proof of crimes.
The most damaging tax evasion case involved the activities of UBS bank in the US. In February 2009, UBS was fined $780 million after admitting helping US citizens dodge taxes. It also handed over data of 285 account holders.
Last year the Swiss parliament ratified a 2009 deal to transfer 4,450 UBS client files to the US – in effect violating Swiss banking secrecy to prevent a ruinous court case for UBS.
Several CDs of stolen client data have been stolen from Swiss banks in the past two years and sold to foreign tax investigators.
Negotiations are ongoing between Switzerland, Germany and Britain to conclude a deal that would compel banks to pay withholding tax on offshore Swiss accounts. Such a deal would not necessitate the handover of client data.