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Swiss banks under pressure to act as tax informers

Checking tax returns: US expatriates will soon be caught in the net Keystone

The United States tax authorities are demanding that foreign banks disclose the identity of Americans who buy US securities through overseas financial institutions.

This content was published on July 4, 2000 - 10:50

The Swiss Bankers Association criticised the decision, saying the US was forcing the world's banks to act as unpaid tax collectors.

However, the Association said the new regulations do not amount to an attempt by Washington to circumvent Switzerland's banking secrecy laws. The Basel-based association says it sees no breach of banking confidentiality because any declaration of identity will be at the discretion of the client.

From January 1 next year, the IRS is requiring all foreign banks which purchase US securities for expatriate Americans to declare their clients' identities.

To make foreign banks comply the IRS has established a system of certification called "Qualified Intermediary". Banks that receive this official designation will be understood to have demonstrated their willingness to comply with the new regulations. In theory, the IRS could blacklist institutions which do not adhere to the rules.

Swiss banks are concerned that they will have difficulty implementing the new regulations. The Geneva-based banker Michel Dérobert, who is also secretary general of the Swiss Private Bankers Association, told swissinfo that implementation would be expensive because banks would need to employ expert consultants to decipher and interpret the rules, and to audit the process.

Dérobert also said there was a possibility that the scheme could backfire on the American authorities because it might discourage investors from putting their money in US securities.

US expatriate organisations are equally uneasy. American Citizens Abroad, a global association with its headquarters in Geneva, has been campaigning for decades to exempt US expatriates from income tax obligations.

One of ACA's founders, Andy Sundberg, says the latest IRS initiative is a risky move, coming as it does when people of many nationalities are already nervous about the longer-term implications of US-led globalisation.

swissinfo

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