Swiss lawmakers reject US-UBS tax evasion deal

8th June 2010, Comments 0 comments

A landmark tax evasion deal between the United States, Switzerland and the banking giant UBS was rejected by Swiss lawmakers Tuesday, sparking a warning of legal action from Washington.

The Swiss parliament rejected the out-of-court settlement, which would allow UBS to reveal the identities of about 4,450 American clients suspected of tax evasion, in a heated debate dominated by disagreements over banking bonuses.

Washington responded with a warning to the Swiss authorities.

"We continue to monitor the events in Switzerland, and we stand ready to pursue all legal options available to us should the Swiss fail to provide the required information," said Frank Keith, spokesman for the Internal Revenue Service, the US tax collection and enforcement agency.

"We have an agreement with the Swiss government. We expect that the Swiss government will continue to honor the terms of the agreement," he said.

Switzerland, the United States and UBS agreed in August 2009 that the bank would identify the 4,450 US clients, after US authorities filed lawsuits to force the bank to hand over information on 52,000 clients.

The deal needed to be endorsed by parliament after a court ruling earlier this year called its legal basis in Switzerland into question.

But it ran adrift on Tuesday as lawmakers clashed in a fiery debate on the separate issue of taxing bank bonuses.

The Socialist Party backed a proposal to tax on bonuses, making it a condition for supporting the UBS deal, but the move was opposed by centre-right groups and the country's biggest party, the far-right Swiss People's Party.

One Socialist lawmaker, Hans-Juerg Fehr, accused parties blocking the tax of "protecting tricksters, tax evaders, and criminal actors in certain banks."

Short of an agreement on bonuses, the UBS accord was rejected with 104 votes against and 76 in favour after a debate broadcast live on Swiss television.

Ahead of Tuesday's vote, Justice Minister Eveline Widmer-Schlumpf called on lawmakers to "close this difficult chapter and fix the problems" of the Swiss financial services centre.

Several parliamentarians also spoke in favour of the deal.

Any further delays would "put us in a risky situation and endanger cooperation with one of the most important economic partners" of Switzerland -- the United States -- warned Hans Grunder, a centre-right politician.

After Tuesday's negative vote, the deal is to return to the Senate, which last week had approved the agreement.

Depending on the upper house's decision, the accord could then be put again to the lower chamber.

With the summer parliamentary session ending on June 18, lawmakers will have to find a compromise by then.

The Swiss government has repeatedly emphasised the importance of the deal, warning that a failure to approve it would hurt the Swiss financial industry.

But following its financial troubles in the US subprime mortgage debacle, public hostility towards UBS is rife. In addition, resistance to a breach of traditional banking secrecy is strong.

The Swiss Bankers Association expressed disappointment at the vote.

The association's chief Urs Roth reiterated that it was in Switzerland's interest to agree on the deal with the United States, Swiss news agency ATS reported.

The Swiss government granted UBS an emergency 60-billion-dollar (47.4-billion-euro) aid package in October 2008 when it suffered huge losses from the US subprime crisis, weeks before the bank was hit by US litigation.

© 2010 AFP

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