The following is reposted from the Tax Justice Network blog, with permission:
The United States has written to Switzerland to demand it hands over detailed information this week on its citizens using Swiss accounts to dodge tax or see Credit Suisse and nine other banks face charges, newspapers reported on Sunday.
and
Banks may be required to pay up to 2 billion Swiss francs ($2.5 billion) in fines, SonntagsZeitung reported, citing a separate, unidentified person with knowledge of the situation. The U.S. may also seek client details from Swiss wealth managers in addition to the 10 banks, according to the newspaper.
The Financial Times adds:
Switzerland and the US are gearing up for another bruising confrontation over bank secrecy . . . The letter would represent a significant increasing of the pressure on Switzerland to again bend its once watertight bank secrecy rules and deliver further client names to the US.
Here is a description of details added by Switzerland'sSonntagszeitung newspaper, which is one of the two to have broken the story, courtesy of TJN correspondent Steven Eichenberger:
"The Swiss German weekly newspaper, the SonntagsZeitung, has published an article yesterday revealing a correspondence between Michael Ambühl, Swiss state secretary, and James Cole, US Deputy Attorney General.
Ambühl has apparently approached Cole with the idea of introducing a "new" instrument to the 2009 DTA [Double Tax Agreement] between the US and Switzerland, an agreement which has not yet been ratified. This "new" instrument foresees enabling the US authorities to submit group requests without receiving individual names in return. This sounds a lot like the withholding tax solution, except that it is sliced up into several requests. Ambühl must have been guided by the recent success encountered in negotiations with Germany and the UK.
Cole answered that this solution could be tested, but only under the following conditions (listed by the SonntagsZeitung)
- He wants comprehensive statistical information about US citizens and their assets in ten Swiss banks (amongst which of course Crédit Suisse, and furthermore the Bank Wegelin (Konrad Hummler), Julius Bär and the Zürcher and Basler Kantonalbank).
- The Swiss authorities have to reveal a quantity structure of US assets in Swiss banks
- Simultaneously, Cole wants to make use of judicial orders (Grand Jury Subpoena, John Doe Summons) in order to enforce disclosure of customer information with regards to the ten banks
- Individual deals will be sought with the ten banks
- An agreement for all remaining (not the ten) shall be reached, disclosing "certain account information"
According to the SonntagsZeitung, there is a sense of alarm amongst the Swiss banking community. When reading the article one gets the impression that this is because they will be forced to reveal some information and will have to pay fines as was the case with the UBS. Could this, however, be a concerted plan, by the Swiss government and financial institutions, to sell some names and pay some fines in order to enshrine a DTA very much in favour of Swiss Banks?
We think that the United States, unlike the UK and Germany, is unlikely to be railroaded by too-clever-by-half Swiss proposals. The U.S. has taken the aggressive (and correct) approach: obtaining initial data, then making tax evaders and their pinstripe intermediaries feel the heat, do deals with a few of them in exchange for more data, then spread the investigation further. There's no telling where this might stop.
Another TJN correspondent, this time based in the U.S., said this:
"The Swiss banking community should prepare for the worst, at least with respect to US clients, either direct or indirect. There is surprisingly widespread consensus here that the UK treaty approach is completely unacceptable."
Why have Germany and the UK been so feeble, and damaged so much progress?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“A most favoured nation” clause in the UK agreement would be good negotiating. Not sure if one exists – but a definite oversight if it doesn’t.
But Patric Odier of the SBA said this today “The U.S. should take the tax agreements with Germany and the United Kingdom as an example. Bilateral problems between friendly nations should be solved by mutual agreement”
You are absolutely right, Mark, about friendly nations. But Switzerland isn’t friendly. Its policies are undermining the tax base of other nations.
The US situation is not the same as the UK/German. The US seeks to tax their citizens worldwide including those living in Switzerland, whereas the UK and Germany do not.
True but is the issue here not one of protecting the jurisdictional tax base, however defined? If so then it seems to me that whether the US and UK/DL have different tax bases is not so important as whether they have the power to identify and defend through audit measures, including inter-jurisdictional exchange of information, compliance with obligations arising from the country’s tax laws. After all, one can avoid UK, Germany and/or US taxes to name only three using secrecy jurisdictions such as Switzerland. Otherwise I may have missed your point.
It is much harder for the bank to determine the tax residence and thus its obligations of a German or UK national if their affairs are more complex than the average person, which they may well be if they are high earners or high net worth individuals (multiple residences, self employed or not employed at all).
In the case of US citizens the liability to US taxation is unambiguous.
It’s their job to get evidence now
Let’s not beat about the bush about this: they are required to get and hold the evidence
“It’s their job to get evidence now
Let’s not beat about the bush about this: they are required to get and hold the evidence”
In the case of US passport holders, that is pretty simple. In the case of UK or German citizens living outside the UK (let’s say Middle East oil workers who like to keep their savings outside the Middle East, or F1 drivers living in Monaco) but who may or may not have a ‘centre of gravity’ of their ‘life and interests’ in the UK or Germany, that is a different kettle of fish.