Swiss Upper House Backs UBS Deal With U.S.

On Thursday, a Swiss and U.S. deal to end the tax dispute involving UBS was approved by the upper house and is closer to being approved by the full Parliament. The lower house is expected to vote on the deal next week and many predict they will give the package a thumbs up as Switzerland’s main political party officially took back their objection to the deal in May.

“The vote of the SVP will also be key in the lower house,” said Fabio Abate, a member of the Liberal Party who sits in the lower house. “But I think in the end a majority should back the UBS deal.”

However a green light is not yet certain.

“I think it will be slightly more difficult in the lower house,” President Doris Leuthard of Switzerland told the television network SFInfo when asked about the chances of the lower house supporting the UBS deal.

The upper house also voted on Thursday against allowing a referendum on the tax deal. But the question is still open on whether the lower house would do the same, Mr. Abate said. A referendum would delay by several months the UBS agreement from coming into force.

Continue reading at NY Times.com…

Swiss Sell UBS AG Stocks, Tax Settlement Already Rewarding

As a result of the yesterday’s announcement that the names of over 4,500 Americans using bank accounts to avoid taxes would get turned over to the US government, Switzerland decided to let go of their UBS AG investments this morning. The sale earned the Swiss government an estimated $1.2 billion Francs – or about $1.1 billion in US currency.

The Swiss state sold 332.2 million shares to institutional investors at 16.50 francs each, the government said in a statement today. Including a 1.8 billion-franc cash payment the state is getting from UBS, the proceeds amount to about 7.2 billion francs.

The government bought 6 billion francs of UBS mandatory convertible notes last year to help the Zurich-based bank split off toxic assets amid the worst economic crisis since the Great Depression. The settlement of a U.S. lawsuit that sought data on 52,000 UBS clients and a 3.8 billion-franc capital increase in June strengthened confidence in the bank, the government said.

“The exit is a positive signal, as it shows the confidence of the Swiss government regarding the situation of UBS,” Stefan Schuermann, an analyst at Vontobel with a “hold” rating on the stock, said in a note. “The placement increases UBS’s flexibility in rebuilding its franchise and will help to keep or hire key employees.”

UBS rose 76 centimes, or 4.5 percent, to 17.50 francs in Swiss trading. UBS shares have risen 17 percent since the U.S. and Switzerland said they had reached an agreement in principle on the tax lawsuit on July 31.

Continued at Bloomberg.com…

Swiss to Reveal UBS Accounts to Settle U.S. Tax Fight

The legal battle between the U.S. and the Swiss looks like it may finally be coming to an end, according to a new Reuters.com story. As part of the deal, Switzerland has agreed to hand over 4,450 UBS AG bank accounts to U.S. authorities. This historic deal represents a new direction for IRS enforcement, and will likely result in millions of dollars in federal revenue.

With Switzerland's famed banking secrecy under fire, the Swiss have also agreed to process requests by the United States seeking information from its banks besides UBS about account holders who may have tried to evade U.S. taxes.

"This announcement today should send a signal - no matter what institution you're with, the IRS is willing to pursue both the institution and the individual," Internal Revenue Service Commissioner Doug Shulman told reporters on Wednesday.

The accounts were at one time worth $18 billion, Shulman said, though he could not provide a current figure.

U.S. authorities would not name any other foreign banks under probe but the IRS is expected to use the Swiss deal as a template to pursue further prosecutions.

"The IRS is now gaining institutional skill and knowledge in how to pursue these types of cases and they're going to use that. This is, I believe, the beginning and not the end," said Peter Hardy, a former federal prosecutor and specialist in white-collar crime at Post & Schell in Philadelphia.

UBS Tax Crackdown Widens to Hong Kong

Just weeks after reaching a settlement with the U.S. government, Switzerland’s largest bank UBS AG is running into even more problems. This time reports suggest that American taxpayers used illegal bank accounts and fake businesses in Hong Kong to avoid reporting their income. Check out the following story from the Wall Street Journal.

The U.S. crackdown on clients of UBS AG is widening into a global hunt, with the government detailing in court documents how the Swiss bank and outside advisers helped Americans hide money using enterprises set up in Hong Kong.

For the first time in the government's long-running bid to ferret out the names of U.S. tax-evaders from the Swiss bank's client list, plea agreements entered in the case are providing a clearer picture of UBS's sophisticated efforts to help Americans hide income or the existence of foreign bank accounts.

US, Swiss Cement Deal On Secret UBS Bank Accounts

From Huffington Post.com:

The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy. However, they kept all details under wraps, including how many of the 52,000 names sought by the IRS from banking giant UBS AG will be revealed.

Depending on the scale of the deal, it could be a new blow to Switzerland's reputation as a safe place to hide assets from the taxman back home.

Switzerland has long been under pressure from European neighbors and the U.S. to open its bank records for foreign tax authorities. The IRS case against UBS has been partly credited with pushing the Swiss government to agree in March to comply with tax investigation rules from the 30-nation Organization for Economic Cooperation and Development. UBS earlier this year named about 300 American clients in a separate case.

William Sharp, a Florida tax lawyer who represents American UBS clients, said he expects the agreement to allow Swiss authorities to interpret bank secrecy laws more broadly and allow a "substantial handover" of names.

"I would guess that the U.S. would not enter into this agreement in the absence of a major fine and penalty without having at least several hundred if not thousands of names turned over," Sharp said.

The IRS in February asked U.S. District Judge Alan S. Gold in Miami to force Zurich-based UBS to turn over names of some 52,000 American clients believed to be hiding nearly $15 billion in assets in secret accounts. UBS and the Swiss government had resisted, arguing that to do so would violate Swiss banking confidentiality laws that date back centuries.

The Swiss and U.S. governments announced in late July they had agreed in principle on major issues but released no details. They had hoped to present a final deal at a hearing Aug. 7, but resolving the differences took longer.

On Wednesday, lawyers for the U.S. and UBS told the judge in a brief conference call they had sealed the deal.

Swiss, U.S. Seen Needing Time to Ink UBS Tax Deal

The August 3^rd deadline for a settlement between Switzerland and the U.S. on the UBS case seems unlikely, according to several sources close to the case. Alibaba.com recently published a great article on the topic, explaining why a settlement is so hard to reach, and what the outcome is likely to be. You can read a segment of the story below.

Talks between Switzerland and the United States to end a tax row targeting UBS could stretch beyond an Aug. 3 deadline to allow more time for a detailed settlement, a source familiar with the situation said on Friday.

U.S. tax authorities are seeking to force Swiss wealth management giant UBS to disclose the identity of an estimated 52,000 U.S. holders of secret Swiss accounts suspected of dodging taxes even though this breaches Swiss bank secrecy laws.

A trial against UBS was scheduled to start in Miami on July 13 but presiding judge Alan Gold agreed to delay it until Aug. 3 to allow time for a settlement.

A status call between Gold and lawyers from UBS and the U.S. Internal Revenue Service on July 29 could be an opportunity for an announcement of a delay. A meeting between Swiss Finance Minister Micheline Calmy-Rey and U.S. Secretary of State Hillary Clinton is also scheduled on July 31.

"I would not be surprised if during the July 29 call or at the weekend there may be another request for a delay," a source familiar with the situation told Reuters.

Many investors believe the judge will again postpone the trial as the tax talks are complex and working out a deal that without further weakening bank secrecy requires time.

"Nothing will happen on Wednesday. The parties will agree to postpone the deadline until September to reach an agreement," a Swiss-based trader told Reuters.

Two Swiss-based sources familiar with the situation said a deal was unlikely to come before July 29.

Tax Havens Onshore

From the New York Times.com:

Few here in Switzerland have been other than disgusted by the behavior of UBS and many of us have moved money away from that bank in protest. However, your editorial “The Swiss and their secrets” (May 16) supports demands that are of dubious legality.

Were the Americans to practice what they preach, the I.R.S. would investigate its own tax havens of Delaware, Wyoming and Nevada, the latter having allowed some 80,000 dummy companies to be anonymously registered in 2008 alone, presumably for U.S. tax evasion reasons.

Moreover, a long overdue overhaul of tortuous U.S. tax laws might prove more productive than attacks on a foreign bank; many of the 52,000 U.S. customers of UBS whose names your editorial asks for might then be happy to head home.

Switzerland Asks US To Drop Tax Case Against UBS

From the Wall Street Journal.com:

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.

US, Switzerland To Begin Tax Treaty Negotiations

From The Associated Press:

The Treasury Department this month will begin revising a tax treaty with Switzerland, which has pledged to increase transparency and help crack down on tax evaders with money in Swiss banks.

The Swiss government opened the door for the talks last month after agreeing to cooperate with international tax investigations of wealthy foreigners accused of hiding billions of dollars in banks there. The move broke with a long-standing tradition of strict Swiss protections for individuals who use its banking system.

"We welcome moves by Switzerland to implement international standards by agreeing to revise the U.S.-Switzerland tax treaty," Treasury Secretary Timothy Geithner said Monday. "I look forward to swift conclusion of an agreement ... and I will continue to demand transparency from countries on behalf of American taxpayers."

The Treasury Department said negotiations between the two nations will begin April 28 in Berne, Switzerland.

The talks come as the Obama administration wants Swiss bank UBS AG to turn over information on thousands of U.S. customers who concealed their accounts from the government in violation of tax laws. UBS has formally accepted responsibility for helping Americans hide assets and agreed to pay $780 million in fines and restitution.

U.S. authorities in January charged Raoul Weil — a senior executive with UBS — with conspiring to hide $20 billion in assets from the IRS using secret overseas accounts. And a former UBS banker, Bradley Birkenfeld, pleaded guilty last year to fraud conspiracy charges in Fort Lauderdale, Fla. He has been cooperating extensively with U.S. investigators and has not yet been sentenced.

Swiss banks hold an estimated $2 trillion of foreign money, and financial services account for about 12 percent of the nation's economy. According to the Boston Consulting Group, those holdings amount to one-fourth of the world's foreign-owned assets.

The recent policy shift by the Swiss government allows it to demand bank account holders' identities in cases of suspected wrongdoing and share that information with foreign authorities.

World leaders meeting in London last week pledged to crack down on tax haven countries by imposing sanctions on the worst offenders, such as withholding financing from the International Monetary Fund or World Bank.