Arab Today, arab today swiss bury tax fraud hatchet with us but at what cost
Last Updated : GMT 23:12:04
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Swiss bury tax fraud hatchet with US, but at what cost?

Arab Today, arab today

Arab Today, arab today Swiss bury tax fraud hatchet with US, but at what cost?

Geneva - AFP

Switzerland is racing to end a bitter dispute with Washington over Swiss bank accounts held by US tax dodgers, but observers warn the new-found peace could come at a high cost. The lower house of the Swiss parliament voted Monday in favour of a law that will require Swiss banks to report the holdings of their current and future American clients to US tax authorities. The approval of the US Foreign Account Tax Compliance Act (FATCA), which aims to block Americans from hiding money from the taxman in Swiss accounts going forward, comes just over a week after the Swiss government agreed to a separate deal to help the country\'s banks make amends for past wrongdoings. Swiss banks are believed to have accepted tens of billions of undeclared dollars from US citizens, though they now refuse such money, and Bern insists both recent deals are needed to end a dispute that has poisoned relations between the two countries for years. Critics however warn that the deal aimed at settling past wrongs, which comes with stiff fines attached, could prove deadly for many Swiss banks. \"It\'s devastating for Switzerland\'s financial industry,\" said business lawyer Douglas Hornung, warning that even bigger penalties could be lurking around the corner if European tax authorities decide to follow in Washington\'s footsteps. The deal offers individual Swiss banks the opportunity to avoid US prosecution if they agree to hand over information on US citizens\' accounts and to pay an \"appropriate\" fine -- assessed at 20-50 percent of the value of undeclared accounts, depending on the time they were opened. Banks that opened undeclared accounts for US clients before 2009, when Washington launched its battle by slapping UBS bank with a whopping $780-million fine for complicity in tax evasion, will face lower penalties. But fines will be stiffer for banks that scooped up tax-dodging US clients after that. An unspecified number of banks already under investigation by US authorities will meanwhile not be eligible to take part in the arrangement. The Swiss Bankers Association (SBA) hailed the agreement as a way for the banks to \"settle their US past quickly and conclusively.\" But spokeswoman Sindy Schmiegel Werner acknowledged it was unclear how the Swiss banks would weather the storm. \"We don\'t know how exposed each of our members is,\" she told AFP, insisting though that accepting the deal was necessary to clear away the legal uncertainty that had been dogging the industry for years. Walter Boss, a tax lawyer with Poledna Boss Kurer AG in Zurich, said uncertainty was \"one of the worst enemies in the financial world.\" But more clarity could come at a steep price, even for banks that maintain they have done nothing wrong. Forced to cough up US client records, they are basically being \"deemed guilty until proven innocent,\" Boss said. Hornung was even more critical. \"It\'s not really an agreement, but more of a dictate from the United States,\" he said. And after suffering the onslaught from Washington, the biggest danger could lie ahead if European tax authorities decide to take the same route as their American counterparts, Hornung warned. \"Certainly, the European clientele is much bigger than the US clientele. If the Europeans take the same road, the small banks simply can\'t survive,\" he cautioned. Schmiegel brushed aside that concern, pointing out that US tax law is very differen since it is applied to all citizens, regardless of where they live or work in the world. \"I don\'t think the European Union will proceed the same way the US did,\" she said. US tax law is meanwhile creating headaches in the run-up to the implementation of FATCA, observers say. Fearing the workload of ensuring compliance and especially the consequences if they slip up, \"banks have been actively eliminating American clients,\" Jackie Bugnion, a Geneva-based tax expert working for the American Citizens Abroad lobby group, told AFP earlier this year. \"It is no secret that many Swiss and other non-US foreign banks are already not seeking nor accepting US clients,\" agreed lawyer Samuel Lohman, who specialises in international law. Since FATCA applies to all American citizens, regardless of their incomes or fortunes, this can have a devastating impact on a wide range of Americans, blocking access to mortgages and investments. So much so that a growing number of dual citizens have been giving up their US passports. For the banks, Americans have become \"toxic\", Hornung said.

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