UBS settlement leaves Switzerland scarred

August 19, 2009

UBS, Switzerland and the United States can all claim a sort of victory from the settlement on Wednesday of their tax dispute.

UBS gets to avoid a fine that — according to the Swiss justice minister — would have threatened its existence. The Americans get the details of some 4,450 accounts that they say have held up to $18 billion, on which fat taxes may be payable. And the Swiss get to draw a line under a threat to their fundamental banking secrecy.

Even so, there will be many who want to keep their financial affairs private who will look for other homes for their cash.

The basics of the deal are as follows. The U.S. will drop its “John Doe” summons that looked for the names of as many as 52,000 Americans with accounts at UBS. This had prompted the Swiss to threaten that they would seize UBS’s data rather than accede to what they saw as a fishing expedition that they said would break Swiss law.

The Americans now say they were never looking for so many accounts, which would include many law-abiding citizens.

Instead, the Swiss will hand over details of 4,450 (the Americans say it could be more than 5,000) accounts of Americans at UBS. The bank, which is the world’s second-largest wealth
manager, will write to affected account-holders urging them to take part in an American tax amnesty, if appropriate.

The Americans gain twice over. First, the affected account-holders will, unless they are stupid, cough up any outstanding tax before the amnesty expires on Sept 23. Anyone with accounts at other foreign banks is also likely to put their affairs in order before Uncle Sam forces them to. Moreover, Americans will in future will careful to comply with U.S. tax law given the reach of the U.S. justice department.

For the Swiss, the chief attraction of this deal is that it allows them to claim that bank secrecy is upheld. After all, they already had agreements in place allowing an exchange of information in the case of suspected tax fraud. They can say that handing over these names is nothing new, but few will be convinced.

There is no doubt that the case, especially when allied to UBS’s near-death experience following the credit boom, has tarnished Switzerland’s image of solidity and respectability. There are new centres, like Singapore, offering discreet banking. They will grow at the expense of the Swiss incumbents.

7 comments

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Singapore, like all the other tax haven jurisdictions, agreed to abide by OECD standards of transparency and exchange of information with foreign governments. Singapore has also signed 2 tax treaties, with Belgium and France, and will sign more in the future (or else will be placed on an OECD list of non-compliant jurisdictions). Thus, it is unlikely that Singapore will offer banking secrecy vis-a-vis tax authorities.

“For the Swiss, the chief attraction of this deal is that it allows them to claim that bank secrecy is upheld.”

Is that your words or their’s? Because if theirs, they are equating secrecy with tax evasion. Or with laundering. Either of which makes UBS a near criminal organization.

US non-banks are proven to be de facto mafia. UBS now proven to be de facto preferred bank for the tax evaders. Both must be thoroughly purged from existence.

Posted by The Real Deal | Report as abusive

Dear writer,
After reading of your article on the above subject,now,my mind is with full of world finance deals.
During college days,economics lecturers used to say,India is rich,but Indians are poor.
Whereas,America is rich and Americans also rich.
After collapse of Some American banks,well known-old companies,I came to understand that,what happened to their fixed assets,the types of investments for some irregular contracts,and by lavish spending with their own set of powers.
We know the history.
In this juncture,either America nor Switzerland had claim for any victory.
Both are 50-50 winning positions.
If there will not be any strict,nationalistic touch for safe deposits,safe borrowing and lending rules by any nations,surely,some financial torture to be borne by us.
yours views,reporting are nice and with wit and humor.
All the Best.

“Either of which makes UBS a near criminal organization.”

Before commenting, it is important to realize that laundering is not considered illegal under Swiss law AND in no country, where a treaty does not exist, does it matter what tax laws are being avoided in another country.

Posted by Keith | Report as abusive

How does the Swiss get away in this day in age of terrorism with thinking laundering is legal?

Posted by a | Report as abusive

Terrorism? The most rampant terrorism system worldwide are taxes. Governments (who ‘create’ nothing but tax everything that moves) are using the terrorism card to strip people of their rights, their privacy, their hard earned income.

The goal of government is CONTROL – and it ALWAYS at the expense of individual rights.

I’m not scared of terrorism, or the drug trade – I am terrified of governments being able to stick their noses in every nook and cranny of person’s life.

Posted by Awake | Report as abusive

Many governments of the world have unbelievable tax burdens and gestapo like tax network. This has to stop, stripping people off their hard earned income and spending it on fancy military equipments to go to war.

Posted by Awaken | Report as abusive