Tax treaty with U.S. may hinge on UBS deal – Swiss minister
By Gertrude Chavez-Dreyfuss and Steven C. Johnson
NEW YORK, July 8 (Reuters) – The Swiss Parliament may not approve a double taxation treaty between Switzerland and the United States if the legal action against Swiss bank UBS is not resolved, Swiss minister of economic affairs Doris Leuthard said on Wednesday.
“Chances of approval (by the Swiss parliament) will be small if the legal action against Switzerland’s biggest bank, UBS, will not be solved,” Leuthard said in prepared remarks before the Swiss-American Chamber of Commerce in Manhattan.
Leuthard said she was not making any threats. “It’s not a threat, but I know my parliament”.
Switzerland and the United States have reached agreement last month on a double taxation treaty, which was a key step towards removal from a list of tax havens and whose ratification now seemed tied to UBS’ fate in U.S. courts.
U.S. authorities have accused UBS of helping rich clients hide money in secret Swiss accounts. The bank faces a court hearing in Miami next week after refusing to disclose data on 52,000 American holders of secret Swiss bank accounts to U.S. Internal Revenue Service.
Switzerland, whose private banks manage around $2 trillion of foreign wealth, aims to secure 12 new bilateral tax deals by the end of 2009 which could allow it to be removed from an OECD “grey list” of states which need to improve tax cooperation and avoid possible sanctions from G20 nations.
Leuthard stressed that UBS’ stability is important for the global financial system and the U.S. economy.
“We know from the Lehman Brothers’ case that when banks of this size have severe problems, it violates financial stability,” she told reporters. “UBS here (in the United States) is a very important employer, a very important investor, much more so than in Switzerland.”
The Internal Revenue Service has been on UBS’ case to reveal its clients, but Berne has held off. The Swiss Justice Ministry had said earlier on Wednesday that Swiss law prevents UBS from handing over client information and to stop that from happening, the government would seize UBS client data if necessary.
“There are established procedures and authorized channels for sharing information,” Leuthard said. “This unilateral attempt to compel the release of information is not covered by any existing international treaty and it would moreover force Swiss companies to break Swiss law.”
She said Switzerland is keen on a “mutually satisfying conclusion of this matter” and that she was hoping for an “extra-judicial settlement”.
Leuthard also stressed that Switzerland “is not and has never been a tax haven.” She added that the country has instead and “open and transparent” tax regime, in clear contrast to actual offshore centers.
Regarding the Swiss economy, Leuthard said it would still struggle next year but conditions would improve after that.
“2010 will be difficult, but we see things getting better by 2011,” she told Reuters after the press briefing.
On the question of deflation, the Swiss minister said she does not believe the downward spiral in prices poses a major threat to the economy.
“This is not trouble for us. We have high energy prices just like here and Europe,” Leuthard said. “The salaries have also increased this year and that’s good news for all employees.”