Under pressure from Washington, Berne agreed to let UBS pass on the data of certain US clients without waiting for the outcome of an ongoing appeal process against the transfer by some of these clients, an unprecedented step in Switzerland.
The US Department of Justice (DoJ) pressured UBS to reveal the details of up to 300 American clients, claiming that some were using secret accounts to evade taxes. On Wednesday, UBS "agreed to pay $780 million in fines, penalties, interest and restitution" to settle a federal lawsuit on the matter, the DoJ announced.
"At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes," said John A. DiCicco, acting assistant attorney general for the DoJ's tax division in a statement.
'Capitulation'
Switzerland's leading newspaper, Neue Zuercher Zeitung, described the $780 million settlement, which UBS agreed with Berne's blessing, as a "capitulation".
"For Switzerland, it is a true catastrophe for the country's first industry, that is to say the banking sector," Geneva lawyer Charles Poncet, a former member of the Swiss parliament, told Radio Suisse Romande.
"This is part of a general move towards greater transparency," said Stephanie Jarrett, a tax expert at law firm Baker & McKenzie.
Under Swiss law, bank data can be transferred to foreign tax authorities only in clear cases of tax fraud, not tax evasion. The latter is not a criminal offence in Switzerland. Clients have the chance to appeal against a data transfer.
The country's financial regulator, FINMA, said last night it had found evidence of some mismanagement at UBS. It said it had decided to push ahead with the US tax settlement as the investigation had "put (UBS's) existence at risk".
French-language newspaper Le Temps, which broke the news of an imminent deal late on Wednesday, said the government agreed to lift its bank secrecy rules during an emergency meeting on Wednesday night.
"This is a political decision. Berne has reviewed the definition of what constitutes a violation of bank secrecy," the newspaper said.
Possible EU implications
The tax spat had been closely watched by cash-strapped western governments and could set a precedent for similar deals with other banks or by other jurisdictions.
"Any success by the US tax authority could encourage tax authorities in other jurisdictions to pursue a similar strategy," Merrill Lynch analysts said in a note.
Tax experts say Germany and France in particular have been watching carefully and may take action against their own banks.
German Finance Minister Peer Steinbrueck has taken aim at Switzerland, repeatedly accusing the country of hiding untaxed money.
UBS itself had warned of potential further actions by other states in its latest financial report.
"Following disclosure of the US cross-border matter, it is possible that tax or regulatory authorities in various jurisdictions will focus on the cross-border wealth management services provided by UBS and other financial institutions," the bank said in a note on litigation.
Tax experts say Switzerland will continue to retain some privacy rules, but expect the country and other smaller jurisdictions to co-operate more and more with western tax authorities when required.
"The offshore industry is dead for customers coming from countries where there is a will to enforce tax obligations," said a Swiss tax lawyer involved in the tax dispute.
A Commission spokesperson said yesterday (19 February), Brussels was following the developments, but declined to comment.
(EurActiv with Reuters)
