The Swiss government may have made nice sounds about being less supportive of bank secrecy but it is now making it quite clear that it doesn't intend to see any end to its lucrative banking business--through which it helps citizens of other countries hide their assets from their countries and/or maybe from their spouses or creditors.
You'll all recall that UBS entered into a deferred prosecution agreement for coming into the US to get wealthy clients to sign up for hidden offshore accounts and then failing to comply with US law and its agreement to serve as a "qualified intermediary" by filing required reports on its accountholders that were US persons. It ultimately gave the US about 250 names of account holders. But there are apparently about 52,000 more that it refuses to give up. The DOJ filed a memo in late June in federal court in Florida asking the court to require the bank to hand over the names in response to the IRS summons. And now Switzerland has filed its own statement in the case, indicating it will seize the information before it allows UBS to hand it over. See Jolly, Swiss Vow to Block UBS from Providing Data to U.S., NY Times, July 8, 2009.
Is this realistically possible? There is a principle of comity between nations, which should argue for the Swiss government to step aside here. UBS, a bank chartered in Switzerland, has intentionally violated US laws in a way that it knew would lead to tax evasion by US citizens, which it knew is a crime in the US even if not in Switzerland. It did this in the US, giving the US jurisdiction over its actions. That information should therefore be avaialble in the US. Its wrong can't be redressed by mere monetary damages: we don't know how much money was in all those accounts that haven't been declared that should have been taxable as income to date and without learning the identification of the taxpayeres, we can't assess the penalties and interest against them, or pursue them for criminal tax evasion. Not pursuing those cases lets the wealthy continue to scoff at the law, and leaves their burden being borne by the overwhleming majority of compliant taxpayers. And of course, though UBS says it is closing those accounts, we don't have any way to verify that such closings will actually occur or to otherwise hold UBS accountable, so more taxes may be evaded in the future.
There is a good deal of irony here, in that UBS was one of the foreign banks that benefited from the US bailout of AIG, receiving at least $2.5 billion. See Roland, Senator outraged over AIG funneling $2.5B to UBS, Investment News, Mar. 18, 2009. UBS doesn't mind getting money from the US government, at the same time that it helps taxpayers keep from paying the government what they owe.
If the bank doesn't provide the information--and if the Swiss government abets it in avoiding doing so--then there should be no mercy here. Somehow, UBS should not be permitted to engage in any investment, banking or other activities in the US. Period. And the US should try to up the ante on the tax treaty negotiation, pushing Swizerland to agree to regularly provide full information on all accounts held by all US citizens, without any specific information request, or else not giving the Swiss the kinds of generous terms that many of our treaties provide (like very low taxation of dividends and royalty income, for example). And if the Swiss won't agree not to continue assisting greedy US taxpayers in tax evasion, then perhaps it will be necessary to begin phasing in a broader financial boycott of Swiss banks.