U.S. Tax Deal Must Comply With Swiss Law, Bank Group Says

Switzerland and the U.S. must agree on a tax deal that complies with Swiss law, according to Patrick Odier, chairman of the Swiss Bankers Association.

“The solution must be globally applicable, be definitive and correspond to existing Swiss law,” Odier told reporters in Zurich today. “We have two double taxation agreements with the U.S. which cover such cases. A solution must be found within the agreements’ framework.”

Switzerland has until Sept. 6 to provide the U.S. with data relevant to a criminal investigation of alleged tax evasion by some clients of Credit Suisse Group AG, SonntagsZeitung reported yesterday. The U.S. is requesting information about accounts held by thousands of Americans in 10 banks including Credit Suisse, the Zurich-based newspaper reported, citing correspondence last week between Michael Ambuehl, the state secretary to the Swiss Finance Ministry, and James Cole, the U.S. deputy attorney general.

Switzerland said in June that it was in talks with the U.S. to resolve the issue of untaxed assets held by American citizens in Swiss bank accounts. The U.S. Internal Revenue Service and the Justice Department have stepped up enforcement to combat offshore tax evasion after UBS AG, Switzerland’s biggest bank, handed over data on 4,450 accounts to resolve a lawsuit.

The way U.S. tax authorities are seeking information from Switzerland on alleged tax evasion by Americans is “legally unacceptable,” Swiss President Micheline Calmy-Rey said in a speech on Aug. 22.

Tax Deals

Switzerland last month reached agreements with Germany and the U.K. over taxation of undeclared bank accounts. Under the accords, due to come into effect in 2013, Swiss banks will collect taxes on investment and capital gains as well as a levy for not disclosing the accounts in the past. Revenue generated will go to the German and U.K. treasuries while client identities remain secret.

“The U.S. should take the tax agreements with Germany and the United Kingdom as an example,” Odier said, adding that another state treaty that was required to allow UBS to disclose data on about 4,450 accounts of its American clients “has to be avoided and the U.S. needs to respect this.”

In February 2009, the U.S. gave Switzerland an ultimatum to disclose client data or face criminal charges against UBS. UBS avoided criminal prosecution by paying a penalty of $780 million, admitting it fostered tax evasion and giving the IRS data on more than 250 accounts. UBS later turned over data on another 4,450 accounts and the U.S. dropped its criminal case against the bank.

“There can be no ultimatums between two friendly nations,” Odier said. “I’m sure that the U.S. understands that we’re not a banana republic here. Therefore I’m confident that a solution can be found with the U.S.”

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