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Swiss National Council Buries 'Lex USA' Tax Bill

by Ulrika Lomas,, Brussels

21 June 2013

Sounding the law's death knell, the Swiss National Council has vetoed the Federal Council's bill creating a legal basis for resolving the Confederation's tax dispute with the US.

Despite the Council of States' continued support for the so-called "lex USA" legislation, the National Council rejected the text overwhelmingly, by 123 votes to 63. The Federal Council must now find an alternative solution to settle the longstanding tax conflict between the two countries.

Although not a surprise, the outcome of the vote will deal a bitter blow to the Government, at pains to end the row. Defending the bill in parliament, Swiss Finance Minister Eveline Widmer-Schlumpf emphasized that it is vital to have legislation, which allows banks to cooperate with the US Department of Justice, to draw a line under the past, while at the same time respecting the rule of law.

This law provides an "orderly solution to the problem," Widmer-Schlumpf argued, warning that without the agreement, the initiation of further criminal investigations or charges against Swiss banking institutions could not be ruled out. Widmer-Schlumpf nevertheless stressed that the Government would authorize banks to cooperate with the US authorities on an individual basis, if necessary, endeavoring to guarantee the best possible protection for bank employees.

Opponents of the text made clear that they "would not sign a blank cheque" by adopting the law, without first knowing the precise details of the US offer. They also underscored that the "monstrous text" would merely serve to undermine Swiss sovereignty, and constitute "a dangerous precedent."

Switzerland's "Federal Act on Measures to Facilitate the Resolution of the Tax Dispute between Swiss Banks and the US" was designed to resolve the bitter dispute over the precise role of Swiss banks in assisting US clients in evading their tax obligations in the US.

The bill authorizes banks to cooperate with the US authorities and to make available the information necessary to safeguard their interests. This includes, in particular, information about business relationships concerning US persons and details of people who were involved in the US business of the respective banks. Client data, including account information, is not covered by the authorization.

Issuing its response to the parliamentary vote, the Swiss Bankers Association said that it "regretfully" takes note of the rejection of the lex USA by the Swiss Parliament.

It said: "A federal law would have been the best possibility for creating legal certainty so that the banks in Switzerland can make use of the US' program in order to draw a line under the past."

It added: "The SBA expects the Federal Council to assume its responsibility and do everything in its power to ensure that a legal framework is created that nevertheless renders the implementation of the US program possible."

The Association warned: "The banks cannot meet the requirements of the program without legal certainty. The consequences thereof for the financial center and the entire Swiss economy are incalculable. Switzerland must not take the risk of a further indictment of a bank lightly."

TAGS: compliance | Finance | tax | investment | business | tax compliance | tax avoidance | interest | law | banking | employees | legislation | Switzerland | United States | individual income tax

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