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Switzerland Unveils Alternative To 'Lex USA'

by Ulrika Lomas,, Brussels

09 July 2013

The Swiss Federal Council has set out the parameters for cooperation between Swiss banks and the US authorities, to resolve the tax dispute between the two countries within the scope of existing law, and particularly within the scope of current data protection and employment law provisions.

On the basis of these parameters, Swiss banks will have the option of applying for individual authorization to cooperate with the US, based on Article 271 of the Swiss Criminal Code.

The announcement follows the Swiss parliament’s definitive rejection of the urgent Federal Act on Measures to Facilitate the Resolution of the Tax Dispute between Swiss Banks and the United States.

This so-called "Lex USA" legislation was designed to end the row with the US, over the precise role of Swiss banks in assisting US clients in escaping their US tax obligations. Intended to draw a line under the past disagreements, the bill would have authorized all of the Confederation’s banks to cooperate with the US authorities and to make available the information necessary to safeguard their interests.

Despite the parliamentary rejection of the Lex USA text, both the Swiss National Council and the Council of States each approved an identical statement in which they concluded that Swiss banks should put the past to rest in the tax dispute with the US, and recognized the need to find a swift solution, urging the Federal Council to take every measure within the scope of existing law to enable the banks to cooperate with the Department of Justice (DoJ).

Commenting on the Federal Council's decision, the Swiss Federal Department of Finance (FDF) explains that:

"As was the case in the urgent federal act, the personal rights of potentially affected employees and third parties must be taken into account by the obligation to provide information and the right to information. For current and former employees provision has also been made for expanded welfare obligations and adequate protection against discrimination as conditions for approval."

The FDF adds: "Beneficiary banks featuring in the so-called leaver lists are also considered to be affected third parties. The leaver lists contain non-personalized data in connection with the closure of accounts and the associated transfer of funds to another bank in Switzerland or abroad. Client data is not covered by the authorization in accordance with Article 271 of the Criminal Code. This data can only be supplied within the scope of existing agreements with the US in the area of double taxation via administrative assistance."

The FDF ends: "All of the banks against which criminal proceedings have already been initiated are reliant on the authorizations. Moreover, further talks are being conducted with the DoJ, on the basis of the parameters approved, concerning the start of a unilateral US program to reach an arrangement for the past for Swiss banks against which no criminal proceedings have been initiated. Participation in the program for these banks would also require authorization within the scope of the approved parameters."

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

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