U.S., Swiss formally sign new tax treaty

September 23, 2009

WASHINGTON, Sept 23 (Reuters) – The U.S. and Swiss governments on Wednesday formally signed a new tax treaty, which the Obama Administration said furthers its efforts to combat international tax evasion.

A deal between the countries, announced in June, revised the existing treaty to allow for data exchange abiding by rules set by the Organization for Economic Co-operation and Development’s model income tax convention.

Ties between the United States and Switzerland were frayed as the U.S. government pursued a tax evasion case against giant Swiss bank UBS AG. The Swiss, UBS and the U.S. government settled the case last month, with the bank agreeing to turn over 4,450 names of clients with undeclared accounts to authorities.

The treaty calls for mandatory arbitration in some tax cases and changes the treatment of dividends when a shareholder is a pension or retirement fund.

Critics of the OECD’s model treaty complain that it requires a country seeking data on an individual to develop a fairly rigorous case before getting needed information.

“You really have to, in certain cases, make the case of tax evasion, before you get some of the most basic information back,” said Tom Cardamone, a managing director at Global Financial Integrity, which advocates for greater financial transparency. “It’s a catch-22.”

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