Swiss court blocks IRS bid for data
Ruling could hinder US probe
GENEVA - Switzerland cannot hand over files on 26 suspected tax cheats to US authorities because their failure to declare assets properly doesn’t constitute fraud under Swiss law, a top court has ruled.
The ruling released yesterday sets limits on Swiss government cooperation with Washington in a US investigation against banking giant UBS AG and could have implications for the way Switzerland handles some 4,424 other Americans suspected of tax evasion. In the first appeal by former UBS customers against the handover of their banking details to US authorities, the Federal Administrative Tribunal found that one client’s failure to fill out a supplementary US tax form didn’t constitute fraudulent behavior.
Evidence of such behavior is necessary under Swiss law, and a 1996 treaty with the United States, for Switzerland to lift its strict banking secrecy rules and provide information on foreign clients to other governments.
The court instructed Swiss tax authorities to reassess the unidentified woman’s case and 25 similar cases that were among 4,450 the government had agreed in August to hand over to Washington. UBS had previously paid a $780 million penalty under a larger deferred prosecution agreement filed in a Florida federal court that included disclosure of an additional 150 names.
In the United States, the Internal Revenue Service said yesterday it still expects the Swiss to honor the agreement.
“The United States and Swiss governments have an agreement to produce information on US account holders at UBS,’’ the IRS said in a statement. “We understand that the Swiss courts issued a decision today, which we have not yet reviewed. We have every expectation that the Swiss government will continue to honor the terms of the agreement.’’