Brazil Scolds Switzerland For UBS Dealings

by Mike Godfrey, Tax-News.com, Washington

16 June 2010

The Brazilian government late last week placed Switzerland on a national ‘tax haven blacklist’, attributing the move to Switzerland’s reluctance to adopt an agreement with the United States that would lead to the radical relaxation of banking secrecy laws in the alpine state.

Brazilian newspaper Estado do São Paolo quoted the Brazilian authorities as stating that a total of 14 countries had been placed on the list on account of their “banking and commercial secrecy.”

The development came after the Swiss lower house of parliament, in its first vote on June 8, rejected a controversial Tax Information Exchange Agreement (TIEA) with US authorities, which would pave the way for the disclosure of tax details pertaining to 4,450 US deposit holders in Swiss bank UBS, breaching Swiss confidentiality laws. Mediated as a settlement to a legal spat between UBS and the US tax authority, the adoption of the agreement is highly controversial as it will signal the end of strict banking secrecy in Switzerland.

While officially, in international fora, Switzerland is considered a territory that has substantially implemented internationally agreed standards in transparency and information exchange, through its placement on the OECD white list, Brazil has signalled that Swiss lawmakers' faltering in the adoption of the US TIEA represents lack of commitment to actualizing its pledge to introduce greater transparency.

Facing reputational risks to the state’s international financial centre and fearing that further legal backlash could lead to the downfall of UBS, the lower house of parliament has since u-turned on its opposition to the agreement, albeit marginally, in a vote on June 15. Should the agreement be approved by the upper house of parliament in a forthcoming vote, it will then be passed to the lower house for final enactment.

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