UBS/US delay proceedings

On Monday, the judge in the Southern District of Floriday hearing the case in respect of the US summons of informtion on 52,000 account holders in Swiss bank UBS issued an order postpoing the trial after both parties indicated that the US and Swiss governments were negotiating a solution to the matter.  The trial is postponed until Aug 3.

UBS has of course claimed that it can't reveal the names of US clients because of Swiss bank secrecy laws.  But UBS violated the US laws in order to establish those accounts.  So whose laws should win.  I hope the US government doesn't take a weak stand on this.  Banking secrecy is a problem, and the government needs to act strongly in this situation to help eliminate the banking secrecy jurisdictions.   Speculation is that UBS raised several billion in an offering last month so tht it could pay a significant fine in this case.  The DOJ has said that it won't settle without "significant" numbersof account holders.  A deal that doesn't actually give over all of the big-time US tax payers with Swiss accounts --such as all of the accounts that, either singly or in the aggregate, hold at least $100,000--would be a problem, and the solution should also weigh heavily on UBS.  The alternative is that the DOJ would attach UBS's vast US assets and possibly even suspend its banking license.  Do the Swiss really want that? 

Materials are available on UBS

joint motion for stay

text of proposed order

reply to Swiss response

supplemental response to UBS brief

News coverage

Anderson, Fla. judge delays hearings in UBS secrecy case, SFGate, July 13, 2009

Selbs, Judge delays trial in UBS tax secrecy case, Times Online, July 13, 2009

Comments

[Marc Jacobs]

What is the Swiss justification for banking secrecy? Other than "that's what we've always done"? It seems pretty obvious that the major point is tax evasion, hiding of criminal profits, hiding of corruption, etc. So what is the official line? That can't be the Swiss government justification, can it?

[LindaMBeale]

The Swiss seem to have convinced themselves that there is a big difference between aiding tax evasion (ok in their books) and aiding tax fraud (supposedly not ok). I think it is really just that there's money in it.

[Asher Rubinstein]

Linda, the distinction between tax fraud and tax evasion under Swiss law may no longer be the new standard. The newly agreed upon (although as of yet unratified and unsigned) Swiss-U.S. Tax Information Exchange Agreement is said to follow the OECD's "Model Convention with Respect to Taxes on Income and on Capital". Under the terms of that Model Convention, Switzerland would have to share banking information for acts that are considered criminal under both U.S. and Swiss law. Previously, only affirmative tax fraud was recognized as a criminal act in both countries. Non-disclosure of foreign income was not a serious crime in Switzerland. If the new TIA follows the terms of the Model Convention, Switzerland would now have to change its internal law to criminalize non-reporting of income. This seems to be a big ambiguity (in the sense that Switzerland has apparently promised to do something, but that something requires a change in Switzerland's internal law). However, it suggests that perhaps the Swiss distinction between tax fraud and non-reporting of income may not govern for much longer.

[Asher Rubinstein]

Marc, I'm not sure that the Swiss have ever had to "justify" their internal law. I can think of many sovereign states that scoff at the notion of having to "justify" their internal matters. Of course, the obvious rebuttal is that in this matter, Swiss internal law has facilitated criminal tax fraud in external countries, and resulting loss of tax revenue in external countries. But again, the Swiss have known this, and condoned it, without "justifying" it. And if you look at the matter of Swiss hiding Nazi assets, including assets stolen from Nazi victims, the Swiss have (reluctantly) made the information public and paid huge amounts in settlement . . . but never, to my knowledge, "justified" it.

[LindaMBeale]

I know that this is what is said, but I'll believe it when I see it, signed and ratified, with the accompanying law changes. And then interpreted in a way that makes a difference.

[Stephen V.]

This situation frosts my bacon. I have a former boss doing 10+ years of hard time for helping little people, in this context, export their tax liability to the Caymans. I am talking about taxpayers with liabilities of $30k & up not zillionaires with Swiss accounts.
Boss & her so-called partners in crime go to jail, her employees all plead guilty to felonies and are banned from the tax prep. bus, clients get audited, IRS gets good press out of it (for their YEARS of effort) and what? Is not the amount of un-taxed offshore $$ in the hundreds of billions?
Law is for little folk.

[Stephen V.]

Here is a recent article on tax havens from a global perspective:
http://www.lrb.co.uk/v31/n13/finn01_.html

[LindaMBeale]

Thanks for pointing that out. My subscription to London Review has run out or I guess I would have seen it!