c.2013 New York Times News Service
c.2013 New York Times News Service
Switzerland and the U.S. are close to announcing an agreement to end their long dispute over how to punish banks that helped Americans evade taxes, banking and government officials said Wednesday.
“There is a deal,” said Anne Césard, a spokeswoman in Bern for the Swiss Federal Finance Department.
“I’d say it would be a matter of days” before the two governments issue a joint statement, she added.
In a conference call with journalists Wednesday, a senior Justice Department official, who spoke on the condition of anonymity, said banks that had helped Americans evade taxes would be required to admit wrongdoing and pay penalties in exchange for deferred prosecution agreements, in addition to handing over information on account holders.
The final agreement will include penalty provisions “starting at 20 percent of the value of accounts starting in 2008,” she said.
The penalties would increase for accounts opened after the Swiss bank UBS reached a deferred prosecution agreement in 2009, she added.
Another person briefed on the matter said the penalties could rise to as much as 50 percent of the value of the banks’ undeclared U.S. accounts.
The total penalties, the Justice Department official added, would probably be “in the hundreds of millions, exceeding a billion dollars.”
U.S. officials will also gain access to information about transfers out of Swiss accounts by Americans who were alarmed by the UBS deal, “and we hope that will encourage additional tax evaders to take advantage” of a voluntary disclosure program conducted by the IRS, she said.
That program has already netted more than $5 billion as 38,000 tax evaders came clean with the government, she said.
The official said that 14 Swiss banks under investigation by the U.S. would not be eligible to participate in the new deal but that they would benefit by having a framework for turning over information. The official declined to identify the banks.
One Swiss bank, Zurich Cantonal Bank, confirmed Wednesday that the impending settlement covered only those Swiss banks not under formal investigation by U.S. authorities. The banks, including Zurich Cantonal, that are under investigation are cooperating directly with the Justice Department, Igor Moser, a bank spokesman, said in a statement by email. He said his bank welcomed the agreement “because it is a precondition for Zurich Cantonal Bank to enter into negotiations” for a deferred prosecution agreement.
“The banks are backing the program,” said Sindy Schmiegel Werner, a spokeswoman in Basel for the Swiss Bankers’ Association.
“It’s a painful thing,” she said, “but it’s the most acceptable solution among a number of unacceptable solutions.”
Switzerland, home to accounts with more than $2 trillion in overseas deposits, has been locked in thorny negotiations with Washington since 2009, when UBS, the largest Swiss bank, agreed to pay a $780 million fine and to hand over information on 4,450 accounts to resolve accusations that it had helped wealthy U.S. clients avoid taxes.
When the Swiss balked at U.S. demands for information from additional banks, Washington began criminal investigations into more institutions, including Credit Suisse and Julius Baer. In February 2012, the U.S. sent an unmistakable message about its determination by indicting Wegelin & Co., the oldest Swiss bank, putting it out of business.
A previous attempt by the Swiss government to arrange a deal failed in June of this year, when Parliament balked, reflecting concerns about privacy and complaints that the agreement was being negotiated in secret. Legislators then called on Eveline Widmer-Schlumpf, the Swiss finance minister and president of the Federal Council, the panel that serves as the Swiss collective head of state, to work out an executive-level agreement with Washington.
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On Wednesday, the Federal Council said in a statement that it had “instructed the Federal Department of Finance to conclude the corresponding work.”
“The signing of the joint statement should enable Swiss banks to resolve the tax dispute with the United States within the scope of existing legislation,” it added. “The dispute has put a strain on relations between the two countries in the past.”
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The U.S. has increased the legal pressure on Switzerland in recent years, indicting dozens of Swiss bankers, lawyers and advisers over their roles in aiding offshore tax evasion by wealthy Americans.
“The pressure on the Swiss has been extreme, and they’re looking for anything they can do,” said Jack Blum, a Washington lawyer and an offshore banking expert.
Schmiegel Werner said that under the proposed agreement, the council would grant Swiss lenders the “exceptional permission” to give Washington the information it wants on bank employees, accounts and business activities.
Requests for client information would still be handled through the “administrative assistance” provision of the double-taxation treaty between the two countries. The revised treaty has been ratified by the Swiss Parliament but has been stalled in Washington, where Sen. Rand Paul, R-Ky., has argued that it would give the IRS too much power and violate Americans’ right to privacy.
A deal would not mean an end to Swiss banking secrecy because it would affect only the accounts of Americans, but it would represent a continuing erosion of the once-ironclad Swiss guarantee that banking information was sacrosanct.
Switzerland is working separately on a tax deal with the EU, of which it is not a member. And it has agreed to cooperate with the United States on the Foreign Account Tax Compliance Act, a wide-reaching U.S. initiative to find U.S. assets hidden overseas.