Switzerland seen laying out U.S. tax deal

Wednesday, May 29th, 2013 | Finance News

By Katharina Bart

ZURICH (Reuters) - The Swiss government is expected to set out soon how it wants to seal the settlement of a long-running tax dispute with U.S. authorities over banks accused of helping wealthy Americans evade billions of dollars in tax.

A government-brokered settlement is largely agreed, according to sources, and is expected to involve fines of up to $10 billion and a handover of client names.

But Finance Minister Eveline Widmer-Schlumpf needs to find a way to make the deal palatable in Switzerland, given the country's tradition of strict bank secrecy which has helped build a $2 trillion offshore financial industry.

At its regular meeting on Wednesday, the seven-member Swiss coalition cabinet is expected to debate how to get the deal done with as little domestic political fallout as possible, sources in the government said.

The Swiss government and the country's banks have argued for months over how to divvy up the expected fines, and an initial attempt at an industry-wide deal failed as the banks could not agree who should pay what. Since then, negotiations have centered on the banks reaching individual settlements.

Credit Suisse Chairman Urs Rohner warned that the United States could escalate the fight against the Swiss if years of negotiating efforts fail now due to political opposition.

"What looks to be a painful solution at first glance is better for everyone than none at all," Rohner told Tuesday's Neue Zuercher Zeitung (NZZ) daily in an interview.

CLIENT NAMES

About a dozen banks are already under formal U.S. investigation and are expected to reach deals in coming days involving heavy fines.

They include Credit Suisse, Julius Baer , British bank HSBC's Swiss arm, privately-held Pictet in Geneva, and a host of smaller players such as LLB's Swiss arm and local government-backed Zuercher Kantonalbank and Basler Kantonalbank .

In a sign of rising U.S. pressure, Julius Baer confirmed on Tuesday it had received an order from the Swiss authorities to hand over U.S. client data based on an existing Swiss-U.S. tax treaty.

The U.S. authorities are believed to want the names of thousands more clients as well as fines in return for ending investigations, and Widmer-Schlumpf is trying to find a way to allow that to take place.

To do so, the government needs to agree a legal framework under which the data can be handed over.

The Swiss parliament agreed in 2010 to allow UBS to circumvent secrecy laws to hand over more than 4,000 files on its U S. clients as part of a $780 million settlement, but lawmakers have vowed not to approve such a deal for other banks.

Time is also of the essence. The Swiss government is sizing up how to fast-track a deal through parliament; U.S. officials want bank data handed over within 120 days of striking a deal, according to sources.

The spat has already taken a high-profile toll among the banks targeted: Wegelin, Switzerland's oldest bank, folded earlier this year after paying nearly $58 million and admitting it helped wealthy Americans evade taxes.

($1 = 0.9760 Swiss francs)

(Additional reporting by Oliver Hirt in Zurich; Editing by Emma Thomasson and Peter Graff)

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