Monday, April 27, 2009

Switzerland Asks US To Drop Tax Case Against UBS

From the Wall Street

Switzerland asked the U.S. government to drop a legal case involving UBS AG (UBS) in return for passing a new tax accord between the two countries, a Swiss official said Sunday.

Swiss President Hans-Rudolf Merz said in Washington over the weekend that U.S. Treasury Secretary Timothy Geithner seemed "understanding of the Swiss position" and that he promised to "look into it," but didn't give a definitive answer, said the Swiss official, who declined to be named.

A U.S. Treasury official said Sunday that during the meeting with Merz on Saturday, Geithner "listened to the Swiss concerns regarding the UBS case and indicated that he understood the importance of appropriately resolving the matter."

UBS, Switzerland's largest bank, recently reached a settlement with U.S. authorities in which it agreed to pay $780 million in penalties and restitution to avoid criminal prosecution in connection with helping wealthy Americans hide accounts and evade taxes. Nevertheless, the U.S. continues to pursue data on more than 50,000 U.S.-based clients of UBS through civil means.

The U.S. Tuesday will start talks with Switzerland, famous for strict bank secrecy, on a bilateral tax treaty. The tax treaty negotiations will be conducted by the Treasury Department, with input from the Justice Department and the Internal Revenue Service, the Treasury official said.

The decision on how to take the case forward would be made by the Department of Justice and the IRS, which is part of the Treasury, the official said. It was not one in which Geithner would intervene.

"It would be very difficult to bring the accord to Parliament for approval with the case still pending," the Swiss official said, reporting what Merz, who's also the Confederation's finance minister, said Saturday after the International Monetary Fund spring meeting in Washington.

Switzerland is in the process of renegotiating dual tax agreements as part of concessions it made on banking secrecy, including agreeing to standards set out by the Organization for Economic Cooperation and Development on transparency and information exchange.

UBS no longer offers offshore banking in the U.S., or financial services out of Switzerland for wealthy Americans.

U.S. prosecutors recently obtained their first guilty plea from a U.S. client of the Swiss bank, as Floridian Robert Moran pleaded guilty in federal court to filing a false tax return and admitting to concealing more than $3 million in a secret UBS account.

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