As reported at the end of July, the United States government and UBS reached an agreement to settle a long-standing tax dispute. The terms of that agreement were unknown until today when the agreement was unsealed and became available to the public. The agreement documents can be found here and here.
Under the agreement, about 4,450 names of U.S. clients of the Swiss bank will eventually be disclosed. As reported by Reuters, Switzerland says the agreement applies only to UBS and that the country’s bank secrecy is generally upheld. The U.S. government, however, reports that Switzerland has agreed to review and process requests by the U.S. seeking information from Swiss banks besides UBS about account holders who may have tried to evade U.S. taxes. Below please find a Reuters article discussing the agreement further and a timeline detailing the tax dispute.
~~~~~
UBS to detail some U.S. accounts, others face scrutiny
August 19, 2009
Reuters
By Jason Rhodes and Kim Dixon
Switzerland will hand over details of about 4,450 UBS AG bank accounts to U.S. authorities, settling a tax dispute that has threatened Swiss banking secrecy, the two governments said on Wednesday.
The Swiss government has also agreed to review and process requests by the United States seeking information from Swiss banks besides UBS about account holders who may have tried to evade U.S. taxes, the U.S. government said.
"This announcement today should send a signal - no matter what institution you're with, the IRS is willing to pursue both the institution and the individual," Internal Revenue Service commissioner Doug Shulman told reporters.
Shulman said the accounts were at one time worth $18 billion, but he could not provide a current figure.
The agreement ends a dispute that has strained relations between the United States and Switzerland and challenged the latter's jealously guarded bank secrecy laws.
It could help UBS, the world's second-largest wealth manager, restore an image that has been battered by the financial crisis and the U.S. dispute, and may open the way for the Swiss government to sell its stake in UBS.
"It's good to get this out of the way but the confidence of a lot of clients has been compromised so I'm not sure we will see inflows return in Q3. It will take time to recover reputation from this," said Jaap Meijer, an analyst at Evolution Securities in London.
Switzerland's Finance Minister Hans-Rudolf Merz said the government wants to sell its stake as quickly as possible and while it would be good business, it also has to consider other factors.
UBS shares were down 1 percent at 16.74 Swiss francs, having reversed some of their earlier losses. Swiss rival Credit Suisse was down 1.3 percent and Julius Baer dropped 0.7 percent.
UBS Chairman Kaspar Villiger said the agreement helps resolve one of UBS' most pressing issues. "I am confident that the agreement will allow the bank to continue moving forward to rebuild its reputation through solid performance and client service."
NEW TREATY
The new treaty between the United States and Switzerland would allow action in the case of "tax fraud and the like" in the UBS case, the Swiss government said. Precise details will be published 90 days after the agreement comes into force.
The U.S. government retains the right to go back and use a summons to collect the names, which roughly equal the number of accounts, if the enforcement process fails, Shulman said.
The client accounts to be disclosed will likely belong to people suspected of committing tax fraud under the terms of a double taxation agreement that obliges Switzerland to provide help if Washington seeks it in a criminal investigation.
Shulman would not comment on whether the IRS has any open probes of other banks.
"The IRS is now gaining institutional skill and knowledge in how to pursue these types of cases and they're going to use that. This is, I believe, the beginning and not the end," said Peter Hardy, a former federal prosecutor and specialist in white-collar crime at Post & Schell in Philadelphia.
~~~~~
TIMELINE: U.S., Swiss settle UBS tax dispute
(Reuters) - Switzerland will hand over details of about 4,450 UBS bank accounts to U.S. authorities, settling a tax dispute that has threatened Swiss banking secrecy, the two governments said on Wednesday.
Following is a timeline of recent events in the UBS tax dispute:
June 19 -- A former UBS banker who once smuggled a client's diamonds into the U.S. in a toothpaste tube pleads guilty to helping a billionaire hide $200 million from U.S. tax authorities, part of a broader tax evasion probe of UBS.
November 12 -- Raoul Weil, head of UBS' wealth management business, is charged with conspiring to help thousands of wealthy Americans hide $20 billion of assets from U.S. tax authorities in Swiss bank accounts.
February 18 -- UBS agrees to pay $780 million and identify certain U.S. clients to settle criminal fraud charges that it assisted rich Americans to evade taxes.
February 19 -- U.S. tax authorities say they are still pursuing a civil lawsuit seeking to access details on 52,000 UBS clients.
February 20 -- UBS warns it could go out of business if it complies with an order to reveal the names of suspected U.S. tax dodgers and would require it to violate Swiss law in a manner that would expose it to penalties.
March 13 -- Switzerland agrees to make concessions on bank secrecy amid a global crackdown on tax evasion.
April 2 -- U.S. authorities arrest and charge an accountant in Florida in the first of what they say could be a series of tax evasion prosecutions of American clients of UBS.
July 28 -- A U.S. client of UBS pleads guilty to using Swiss bank accounts to hide money from the U.S. taxman and says a Swiss government official received $45,000 to help cover up the fraud. Swiss prosecutors launch an investigation the next day.
July 31 -- A U.S. Justice Department attorney says the U.S. and UBS have reached an agreement in principle to settle their dispute.
August 18 -- A filing in a U.S. federal court shows U.S. authorities are criminally investigating more than 150 U.S. clients of UBS.
Aug 19 -- The Swiss government says it will hand over details of about 4,450 bank accounts to U.S. authorities as part of the deal to settle the UBS tax case.
-- Switzerland says the agreement applies only to UBS and that the country's bank secrecy is upheld.
-- Swiss justice minister says if UBS had not reached agreement to hand over client data, it would have faced high fines that would have threatened its existence.
-- Switzerland has agreed to review and process requests by the U.S. seeking information from Swiss banks besides UBS about account holders who may have tried to evade U.S. taxes, the U.S. government says.