UBS defies the US to defend tax evaders

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The FT reports:

UBS defended itself on Thursday against attempts by the US Internal Revenue Service to extract names of thousands of American customers holding offshore accounts, telling a federal court that matters should be resolved via talks between Bern and Washington.

The beleaguered Swiss bank was responding to a legal challenge by the IRS to reveal the names of up to 52,000 accounts as part of the US administration’s efforts to combat tax evasion.

In a 50-page submission to the federal court in Southern Florida, UBS presented itself as the victim of a broader dispute over bank secrecy between the US and Switzerland.

UBS’s court submission, backed by comments from legal and constitutional experts, is based on arguments that issues relating to information about its US offshore clients are covered by the Switzerland-US double taxation treaty.

The bank argues any attempts to access information should be conducted via the treaty, rather than through separate court action.

UBS also notes that, in the single precedent, when the IRS used similar tactics to extract customer information from Bank of America’s Hong Kong branch, this was rejected by the courts.

This is extraordinary. UBS has already agreed it ran its operations in the US illegally. These people, as I understand it, are alleged to have been clients of that illegal US operation. In that case this has nothing to do with the double tax treaty. It is about accessing records held outside the USA of an operation undertaken illegally within the USA.

I sincerely hope the sanction of removing the UBS banking licence is considered in the USA, and elsewhere. Would we tolerate such behaviour from anyone else? The ‘too big to fail’ concept cannot be allowed as an excuse for preventing enquiry into alleged criminal activity, but that seems to be what is happening. That’s not good enough.