Swiss Officials Address Previous Fiscal Issues while Discussing the Implementation of the FATCA
Switzerland is seeking to resolve “past fiscal problems” with the US while discussing the implementation of the new U.S. Foreign Account Tax Compliance Act (FATCA). Mario Tuor, the spokesman for the Swiss Federal Department of Finance’s State Secretariat for International Financial Matters (SIF), indicated that the goal of the talks is to look for a broad resolution of outstanding tax matters concerning Swiss financial institutions rather than negotiating individual agreements. Tuor said that “[t]he objective is to achieve legal security and to keep the bureaucratic workload as low as possible.”
Tuor’s comments followed a June 10 Reuters report which stated that the US and Switzerland are in negotiations on a deal that would allow several Swiss and European banks to engage in a common settlement to avoid potential US prosecution for helping US taxpayers hide accounts. Tax practitioners said that if such an agreement was reached, it would push many taxpayers into the IRSs Offshore Voluntary Disclosure Initiative (OVDI) so that “individuals [may] disclose their offshore assets in return for a set penalty structure and the chance to avoid prosecution at the individual level.”
Michael Abhul, the head of the SIF and Switzerland’s Chief Negotiator on International financial and Tax Issues, leads Switzerland in its discussions with the US. He led the Swiss team that negotiated the handing over of more than 4,000 secret accounts held by US taxpayers in UBS in order to settle proceedings that could have led to the loss of the bank’s operating license in the US for facilitating tax fraud. Ambuhl has no plans to visit the US in the near future, indicating that an agreement may not be approaching.
US officials said earlier that the settlement with UBS was not the end of their attempts to crack open Swiss banking secrecy and find undeclared funds of US taxpayers. On February 23, four managers and bankers with Credit Suisse Group AG, Switzerland’s second largest bank, were charged with conspiring with other Swiss bankers to help US customers use secret accounts to evade income tax.
Tax authorities are also believed to be exchanging information on stolen bank data from secret accounts at Julius Baer, a major private Swiss bank and the Geneva-based private banking arm of HSBC. Julius Baer announced earlier this year that it has agreed to pay German officials 50 million Euros in exchange for avoiding legal proceedings in Germany over accusations that the bank helped German clients evade taxes. HSBC has admitted that the identities of thousands of account holders were compromised by the theft of client data later passed on to French tax officials.
As we previously reported here, FATCA will impose a 30 percent withholding tax on certain payments from US sources, including investment income and capital gains, paid to foreign financial intermediaries or their clients. These foreign intermediaries have the capability to avoid taxes by reaching agreements with the IRS requiring the intermediary to disclose information on US taxpayers that have accounts with the institution. FATCA will have a major impact on Switzerland’s financial sector and its investments in the US. The Swiss Federal Department of Finance noted that SIF was “instructed to explore with US authorities the possible application of simplified rules for complying with FATCA,” but a large number of uncertainties remain regarding the application of the legislation.
Practitioners have indicated that they are not specifically aware of a potential common agreement between the US and Switzerland regarding multiple banks. Notably, however, development of such an agreement would be a blow to bank secrecy and would encourage more people to disclose their assets to the IRS.
If you have any questions regarding FATCA, OVDI, or any other tax provision, please contact Fuerst Ittleman, PL at firstname.lastname@example.org.
This entry was posted on Wednesday, June 29th, 2011 at 3:01 pm and is filed under Tax.
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