MercoPress. South Atlantic News Agency

Swiss parliament agrees to tax treaty with US, which saves leading bank

UBS Chief Executive Officer Oswald Gruebel praised approval of the treaty

Swiss lawmakers approved Thursday a UBS tax treaty with the US, ending a two-year legal battle that threatened the American business of Switzerland’s largest bank. The vote removed the threat of further civil litigation against UBS and additional fallout under US criminal law.

The approval, by majority votes in both chambers of Parliament, came after week-long negotiations between the upper and the lower house during which deputies dropped a demand for the treaty to be opened to a nationwide referendum.

“It’s a breakthrough for UBS and for Switzerland as a financial center” said Peter V. Kunz, head of the business law department at the University of Bern.

The approval means the bank can complete the handover of client data of suspected tax dodgers by August, allowing the Zurich-based bank to close a chapter that the Justice Minister had called an “existential threat.” Almost 37% of UBS 65,233 employees worked in the Americas at the end of 2009. UBS Wealth Management Americas unit managed 690 billion Swiss francs (604 billion USD) at the end of the year.

Switzerland agreed in August 2009 to hand over data on as many as 4,450 UBS clients suspected of tax evasion to the US. Internal Revenue Service. Parliamentary approval became necessary after a court ruled in January that the agreement couldn’t be enforced as it then stood. A referendum would have meant a deadline for disclosure of the information was missed.

The agreement was part of global efforts by countries such as the US and Germany to crack down on tax evasion as budget deficits are ballooning in the wake of the economic crisis. Switzerland, Liechtenstein, Luxembourg and Austria agreed to facilitate the exchange of bank account data.

In the U.S., Internal Revenue Service Commissioner Doug Shulman said, “We will immediately follow up on the information we receive from the Swiss” to “vigorously enforce the law against those who have attempted to evade their tax responsibilities by hiding their assets offshore.”

The Bern, Switzerland-based lower house voted 81 to 63 to endorse the treaty without the referendum option, with 47 abstentions. The upper house approved the accord earlier Thursday.

UBS, Switzerland’s biggest bank by assets, said in an e- mail statement it is “confident” it can meet all its obligations under separate deals with the US Justice Department and Securities and Exchange Commission by the relevant deadlines in August.

“I welcome the parliament’s approval of the state treaty,” UBS Chief Executive Officer Oswald Gruebel said. “I and the whole bank thank the government and those parliamentarians who lobbied for finding a solution in this matter.”

In February 2009, UBS avoided US prosecution by paying 780 million USD, admitting it helped wealthy Americans evade US taxes from 2000 to 2007, and handing over account data on more than 250 US clients. The next day, the US sued UBS, seeking data on 52,000 Swiss accounts.

Today’s vote removed the threat of further civil litigation against UBS and additional fallout under criminal law. The U.S. Justice Department agreed last year to defer prosecution of UBS