The House of Representatives has rejected a deal with the United States that would have enabled the handover of data on thousands of customers of the Swiss bank UBS.
June 8, 2010. Parliamentarians on Tuesday voted 104 to 76 against the controversial settlement deal on sharing banking data that was signed last August between the US and Switzerland. There were 16 abstentions.
The decision is not final however and the issue will now go back to the Senate for review.
The issue was hotly debated until late on Monday night and rejected on Tuesday by the Social Democrats who failed to obtain guarantees of restrictions for “too big to fail” banks, and by the Swiss People’s Party who were against caps on managers’ bonuses.
Under the terms of the deal, Switzerland has until August 20 to process a US request for administrative help concerning 4,450 accounts held by US citizens at UBS. The Internal Revenue Service believes those accounts could contain taxable but undeclared assets.
The Senate approved the deal on Thursday but the green light is needed from both chambers of parliament.
The deal is expected to be approved once again by the Senate, where it is backed by the majority parties, but a second rejection by the House of Representatives would effectively bury the accord.
The situation was further complicated by an earlier vote in which the People’s Party and the Social Democrats joined forces to ensure that the agreement, if accepted by parliament, would be put to a referendum. The timing involved in holding a nationwide vote would prevent Switzerland from meeting the August deadline laid out in the UBS settlement deal.
Also tied into the debate is a roadmap by the cabinet which outlines a timetable of supporting measures designed to prevent a future crisis with “too big to fail” banks. This was rejected by parliamentarians on Monday.
Last week senators also voted against debating the planning of those measures, which include questions regulating banker bonuses, liquidity and how risks are distributed.
The Swiss government was forced to seek parliamentary approval for the UBS settlement deal after the Federal Administrative Court ruled in January that it was illegal.
The deal was drawn up in an effort to protect UBS from legal action after the US sued the bank for information on around 52,000 clients.
It followed allegations that UBS had worked to help rich Americans stash portions of their wealth away from US tax collectors.
Former UBS employee Bradley Birkenfeld acted as a whistleblower, alerting US authorities about the bank’s activities and resulting in American justice authorities fining UBS $780 million and the deal to disclose the details of 4,450 clients.
Evasion or fraud?
The deal signed in August 2009 was widely regarded as the first breakdown in Switzerland’s 75-year-old tradition of banking secrecy.
The government has said failure to pass the deal would damage Switzerland’s reputation as a reliable partner that follows through on its commitments.
But in its January’s ruling the Federal Administrative Court stated that the handing over of confidential UBS client details to US investigators by the Swiss authorities was not fully enforceable because it gave too broad a definition of tax fraud.
Under a current treaty in place with the US, Switzerland can help foreign investigators only in cases of tax fraud unless parliament says otherwise. The US request for UBS information was based on tax evasion, which Switzerland considers a civil matter.
A new agreement with the US that does away with the distinction between tax fraud and tax evasion has been signed but not yet put into force.