Switzerland Close to Tax Deal With U.S.

Switzerland and the United States are close to announcing an agreement to end their long dispute over how to punish banks that helped Americans evade taxes, Swiss banking and government officials said Wednesday.

“There is a deal,” said Anne Césard, a spokeswoman in Bern for the Swiss Federal Finance Department, though the precise terms are to remain secret until a joint statement is issued by the two governments.
“I’d say it would be a matter of days,” she added.

A person briefed on the matter said that the American and Swiss sides had been trading working papers on the issue for many months and that a final settlement would likely require individual banks to pay a fine to the United States equivalent to 20 percent to 50 percent of the value of their undeclared American accounts.

One Swiss bank, Zurich Cantonal Bank, said Wednesday that the impending settlement covered only those Swiss banks not currently under formal investigation by the United States authorities.

The dozen or so Swiss banks, including Zurich Cantonal, that are already under investigation by the United States authorities are cooperating directly with the Justice Department, Igor Moser, a bank spokesman, said in a statement by e-mail. He added that his bank welcomed the agreement “because it is a precondition for Zurich Cantonal Bank to enter into negotiations” for a deferred prosecution agreement with the United States. The American authorities have said that banks under criminal scrutiny must negotiate their own resolutions independent of any global settlement for the Swiss banking industry.

“The banks are backing the program,” said Sindy Schmiegel Werner, a spokeswoman in Basel for the Swiss Bankers’ Association. “It’s a painful thing,” she said, “but it’s the most acceptable solution among a number of unacceptable solutions.”

Switzerland, home to accounts with more than $2 trillion in overseas deposits, has been locked in thorny negotiations with Washington since 2009, when UBS, the largest Swiss bank, agreed to pay a $780 million fine and to hand over information on 4,450 accounts to resolve accusations that it helped wealthy American clients avoid taxes.

When the Swiss balked at United States demands for information from additional banks, Washington loaded on the pressure by starting criminal investigations into about a dozen more institutions, including Credit Suisse and Julius Baer. In February 2012, the United States sent an unmistakable message about its determination by indicting Wegelin & Company, the oldest Swiss bank, putting it out of business.

A previous attempt by the Swiss government to arrange a deal failed in June, when Parliament balked amid concerns about privacy and complaints that the agreement was being negotiated in secret. But legislators then called on Eveline Widmer-Schlumpf, the Swiss finance minister and president of the Federal Council, the panel that serves as the Swiss collective head of state, to work out an executive-level agreement with Washington.

On Wednesday, the Federal Council said in a statement that it had “instructed the Federal Department of Finance to conclude the corresponding work.”

“The signing of the joint statement should enable Swiss banks to resolve the tax dispute with the United States within the scope of existing legislation,” it added. “The dispute has put a strain on relations between the two countries in the past.”

A Swiss official source said that despite the order by the Federal Council to the Federal Department of Finance to craft a final agreement, “negotiations are still ongoing.” The source said that the Swiss side was “still working on wording” and added that “it doesn’t mean they’re ready to sign it now.”
Jack Blum, a Washington lawyer and offshore expert, said that “the devil is in the details, and those details remain to be seen.”

The United States has heaped increasing legal pressure on Switzerland in past years, indicting dozens of Swiss bankers, lawyers and advisers over their roles in aiding offshore tax evasion by wealthy Americans. “The pressure on the Swiss has been extreme, and they’re looking for anything they can do,” Mr. Blum said.

Ms. Schmiegel said that under the proposed agreement, the council would grant Swiss lenders the “exceptional permission” to give Washington the information it desires on bank employees, accounts and business activities.

Requests for client information would still be handled through the “administrative assistance” provision of the double-taxation treaty between the two countries. The revised treaty has been ratified by the Swiss Parliament but has been on hold in Washington, where Senator Rand Paul, Republican of Kentucky, has argued that it would give the Internal Revenue Service too much power and violate Americans’ right to privacy.

The I.R.S. and Department of Justice did not immediately respond to requests for comment.

A deal would not mark an end for Swiss banking secrecy because it would affect only the accounts of Americans, but it does represent continuing erosion of the once-ironclad Swiss guarantee that banking data were sacrosanct.

Switzerland is working separately on a tax deal with the European Union, of which it is not a member, and it has agreed to cooperate with the United States on the Foreign Account Tax Compliance Act, a wide-reaching United States initiative to find American assets hidden overseas.