Swiss Tax Deal To Help Cut Tax Evasion

[KittyWampus]

UPDATE 1-US Treasury: Swiss tax deal to help cut tax evasion
Fri Jun 19, 2009 10:55am EDT

WASHINGTON, June 19 (Reuters) - The U.S. Treasury on Friday confirmed it reached a deal with the Swiss government to revise a two-way income tax treaty to boost an information exchange aimed at combating tax evasion through offshore accounts.

The changes, the result of more than two months of negotiations, are a key step towards Switzerland's removal from an international "gray list" of tax haven states. An official signing of the new protocol is expected in the next few months, the Treasury said.

"This treaty will increase our ability to enforce our tax laws and will help bring an end to an era of offshore accounts and investments being used for tax evasion," U.S. Treasury Secretary Timothy Geithner said in a statement.

The treaty revisions strengthen the exchange of information agreement between the United States and Switzerland, the world's largest wealth manager, known for its strict bank secrecy laws. The U.S.-Swiss pact will now be in line with standards set by the Organization for Economic Co-operation and Development, which has ordered Switzerland to improve cooperation in tax matters to avoid possible sanctions from Group of 20 members.

The United States and Switzerland have been renegotiating a tax treaty since April, part of the Swiss bid to secure 12 new bilateral tax treaties by the end of 2009 that will allow it to boost its standing with the Paris-based OECD.

In the background is a lawsuit by the U.S. government against Swiss bank UBS AG (UBSN.VX) (UBS.N) to retrieve tens of thousands of names of American clients with funds in Swiss bank accounts.

Switzerland, whose private banks manage around $2 trillion of foreign wealth, had asked Geithner to drop the civil suit in return for a tax deal. The Treasury's statement made no mention of the UBS case.

UBS is fighting the suit and says compliance would require UBS employees to commit fraud in Switzerland, which jealously defends its bank secrecy legislation.

UBS settled with the U.S. Department of Justice in February to avoid criminal charges by agreeing to pay a $780 million fine and provide a certain number of U.S. account holder names. (Reporting by David Lawder and Kim Dixon; Editing by Padraic Cassidy)