|This treaty will increase our ability to enforce our tax law,'' said Treasury Secretary Timothy Geithner.|
US, Switzerland agree on plan to crack down on income tax evasion
WASHINGTON - The United States and Switzerland have agreed to increase the amount of tax information they share to help crack down on tax evasion.
The Treasury Department said yesterday that the two nations concluded negotiations on an amended tax treaty. The discussions took place as US legal authorities are conducting investigations into allegations that giant Swiss bank
Treasury Secretary Timothy Geithner said the Obama administration was committed to reducing offshore tax evasion.
“This treaty will increase our ability to enforce our tax law and will help bring an end to an era of offshore accounts and investments being used for tax evasion,’’ he said in a statement.
The protocol, which the two countries are expected to sign in the next few months, would revise the existing US-Switzerland treaty to allow for a greater exchange of information as permitted by a model income tax convention adopted by the Paris-based Organization for Economic Co-operation and Development.
The negotiations over a strengthened tax treaty were taking place as US authorities have been pressing UBS to hand over the names of 52,000 clients suspected of tax evasion, a move the bank has argued could break Swiss privacy laws.
UBS has already paid $780 million in fines and restitution to settle allegations that it helped American customers evade taxes.
Swiss banks, which have a tradition of secrecy in financial matters, hold an estimated $2 trillion in foreign money, and financial services add about 12 percent to the country’s economic output. According to the Boston Consulting Group, these holdings total one-fourth of the world’s foreign-owned assets.
In a statement issued in Bern, the Swiss Economics Ministry said the agreement with the United States was reached after a final three days of negotiations. The ministry said that Swiss businesses and local governments would be given the chance to comment on the proposed changes. Switzerland’s Federal Council and Parliament will decide whether the new agreement is allowed to take effect.
Since taking office in January, the Obama administration has been pushing initiatives to close loopholes that have allowed US investors to evade taxes by using offshore tax havens.
At the Group of 20 leaders summit in London in April, President Obama backed efforts to boost adherence by all countries to international standards for exchange of tax information as part of a package of initiatives that were adopted to deal with the global economic crisis.
Switzerland and other countries considered bastions of banking secrecy have come under pressure from the United States, Germany, France, and Britain to crack down on tax evaders.
Obama’s budget proposals to Congress also include increased support for the Internal Revenue Service to reduce the amount of taxes lost through the illegal use of hidden accounts by wealthy investors.