Swiss to block IRS demand for clients' names

Swiss to block IRS demand for clients' names

Filing in UBS case

Agence France-Presse Published: Thursday, July 09, 2009
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The Swiss government has vowed to go all out to prevent banking giant UBS AG from releasing client data to U. S. tax authorities and will seize the information itself if necessary, documents showed yesterday.

In a filing to a U. S. District Court in Miami, Bern also accused U. S. officials of seeking to "provoke international conflict" through a lawsuit to force UBS to divulge names of 52,000 U. S. clients suspected of tax evasion.

"The government of Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally," the Swiss government said in its filing. This includes "if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons and expressly prohibiting UBS from attempting to comply" with the U. S. authorities.

UBS, one of Switzerland's biggest banks, has argued that it cannot comply with the U. S. demand as such a move would mean violating Swiss banking secrecy law and could therefore make it liable for prosecution in Switzerland.

A U. S. judge, meanwhile, ordered the U. S. government to say whether it was prepared to shut UBS in the United States as part of its battle to learn the identity of the 52,000 secret accounts.

U. S. District Judge Alan Gold, set to preside over a hearing on Monday of a suit seeking to force UBS to provide the information, asked specifically yesterday about "receivership and/or seizure of UBS' assets within the United States."

Judge Gold said such remedies might be requested of the court if UBS failed to comply, or was prevented from complying by the Swiss government. He gave the U. S. Justice Department until noon on Sunday to respond.

In its Florida court filing, the Swiss government backed up UBS's claim, saying the company was "unable to comply with the summons without violating Swiss law" and stressed that it was ready to intervene if necessary.

"It is hoped that it will be unnecessary for the government of Switzerland to take the extraordinary action of issuing an order to seize the information at issue, but such an action should be expected if the IRS [Internal Revenue Service] continues to pressure UBS to violate Swiss law," the government said.

http://www.nationalpost.com/scripts/story.html?id=1772611

Yaaa! Someone with the stones to stand against tyranny! (hope it's not a front)

Great move for the Swiss......

another article along the same lines

Picking on the Swiss The Obama Administration blows up a tax treaty.

President Obama has been traveling the world to "reset" diplomatic relations with the likes of Russia and Iran. But his Administration continues to do what it can to blow up America's long and amicable relationship with Switzerland.

In a federal court in Florida, the IRS and Justice Department are seeking to compel the Swiss bank UBS to hand over the names of 52,000 U.S. taxpayers with private-banking accounts in Switzerland. According to an affidavit filed with the court by the Swiss tax authorities, the summons "does not identify any facts that could be construed as constituting tax fraud or the like, but rather makes a broad demand for the identity of all U.S. taxpayers for which certain forms have not been filed."

This sort of fishing expedition expressly violates the U.S.-Swiss treaty on sharing tax information. The original treaty dates back 30 years, and under the pact the Swiss regularly provide the IRS with information on specific cases. But what the IRS is attempting here is a mass search of U.S. taxpayers merely for banking in Switzerland.

This is not to say that everyone caught up in the IRS's dragnet is pure. But the American system of justice contains probable cause and reasonable search requirements precisely to prevent law enforcement from rounding up everyone who might conceivably be guilty of some crime. And while Justice argues that UBS systematically marketed its private banking services in order to avoid U.S. taxation, the charges against UBS itself were settled in February, so this is not about the bank. It is about its customers, and an effort to grab perhaps a couple of billion dollars in allegedly unpaid taxes.

Those customers are protected by Swiss bank-secrecy laws that make it a felony to improperly disclose client identities. Those laws are very much in force, and the Swiss authorities have threatened to seize the client data demanded by the U.S. rather than permit UBS to comply.

Switzerland is a neutral country and so technically isn't an American ally, but it has long been a good friend, representing U.S. interests in Cuba and Iran, among other good offices. On Monday, Judge Alan Gold delayed until August a hearing on the case, giving UBS and the feds time to reach a settlement before the judge rules on the IRS demands. Justice is nonetheless still threatening to indict UBS if it fails to comply.

Apart from the diplomatic ramifications, the government's request for so broad a swath of information could well run afoul of the Fourth Amendment's protections against unreasonable search.


http://online.wsj.com/article/SB124715626161518571.html

thanks for the update the "and under the pact the Swiss regularly provide the IRS with information on specific cases"
statement does concern me though........

Sounds to me like the IRS is gettin too big for their britches...Dang Nazi's!