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Switzerland Reiterates Aims To Fulfill UBS Agreement With US,
by Ulrika Lomas, Tax-News.com, Brussels
Monday, February 01, 2010
The UBS Agreement between Switzerland and the US, under which Switzerland agreed to hand over some 4,450 names of UBS account holders, was thrown into doubt following a benchmark Federal Administrative Court decision that ruled against the granting of treaty assistance to the US in cases of serious tax offense.
The Federal Administration, however, has moved quickly to defuse the situation. In a statement issued on January 27, if says: “The Swiss Federal Council firmly
believes that the ongoing threat of a conflict with the USA over legal and sovereignty
matters – with all of its negative impacts on Switzerland as a center
of finance and business – can be eliminated for good only by executing
the UBS Agreement.”
The Court's decision of January 21 was
reached on three separate points of law.
It classified the Treaty Request Agreement of August 19, 2009, as merely a mutual
agreement that permitted no change to terms that had been given binding definitions
in the bilateral double taxation agreement.
Indeed, the Court ruled that the protocol to the double
taxation agreement defines "tax fraud or the like" conclusively as
tax or duty fraud, which does not include any serious tax offenses in the sense
of the continued evasion of large sums of tax.
According to the Federal Administration: “The Federal Council approved
the Treaty Request Agreement after careful examination of the legal situation
and on the basis of expert opinions. The Federal Administrative Court viewed
the legal situation differently. The Federal Council must acknowledge the Court's
ruling and put it into action. It has thus instructed the Federal Department
of Finance (FDF) to cancel a further 25 final decisions that are still pending
before the Federal Administrative Court.”
It continues: “Given that the Federal Administrative Court's benchmark
ruling is legally enforceable, it is thought that treaty assistance will be
ruled out in around 4,200 cases. Only in around 250 cases may information be
exchanged with the US authorities. If this problem cannot be resolved through
consultations or negotiations, under the UBS Agreement the USA might take 'proportionate
rebalancing measures' to rectify the inequality that has arisen between
agreed rights and obligations. There might therefore be a risk that the USA
will resume the civil proceedings (known as the 'John Doe Summons'
proceedings) against UBS, and that a US court may rule that the bank must hand
over data relating to around 4,450 accounts."
In a first step, the Federal Council has confirmed that it intends to continue
negotiations with US authorities in an attempt to explain the situation from
its perspective. The Federal Council's options for action would then be discussed
with the US authorities. Switzerland will then request that the US provides
detailed information on client data received under the disclosure program.
In a possible second step, Switzerland might then put the UBS Agreement to Parliament
for approval, the administration notes – an approach the Federal
Administrative Court's ruling had put forward as a possible solution. In that case, in
any future appeals, the Court could not then regard the
agreement as merely a mutual agreement; rather, the agreement would stand as
a treaty of the same status as the older and more general bilateral double taxation
agreement and, according to general rules of interpretation, would take precedence.
The Federal Administration statement concludes: “An amendment to the Agreement
should permit its provisional application from the date of signature. Here,
the Federal Council is basing its actions on the authority granted to it under
governmental and administrative organization law, which permits such steps to
be taken to safeguard Switzerland's important interests, and in cases of particular
urgency. This means that UBS can continue to fulfill its obligations to the Swiss
Federal Tax Administration (SFTA). For its part, the SFTA can continue to conduct
the treaty request process and issue the necessary final decisions. Although
client dossiers in legally enforceable cases may not be sent to the US authorities
until the Agreement has been approved by parliament, this approach makes it
possible to comply with the deadlines set in the Treaty Request Agreement, which
remains binding under international law.”
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