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Swiss Court Ruling Blocks Disclosure of Data and Hinders Efforts to Resolve Tax Haven Dispute

Posted on April 17th, 2012 | Author: Ted Margolis

Switzerland’s Federal Administrative Court has ruled that Switzerland may not provide U.S. authorities with the details of Credit Suisse’s American client accounts.  The decision is a set back to efforts between the Swiss and American governments to resolve the ongoing tax haven dispute between the two countries.

Eleven Swiss banks, including Credit Suisse, are currently under investigation by the U.S. Justice Department for allegedly aiding U.S. citizens to illegally evade paying U.S. taxes.  The Swiss law distinguishes between tax fraud, a crime, and “tax evasion,” which the Swiss do not consider to be illegal conduct.  This distinction has been the rationale for Swiss banks to maintain client secrecy when approached by U.S. authorities.  In the U.S., tax evasion, like tax fraud, is a crime.  Basically, any person who willfully attempts to evade any federal tax may be guilty of a felony, the conviction of which may result in a fine of not more than US$100,000 ($500,000 for corporations) or may, in addition to the fine, result in the person being imprisoned for not more than five years.

The Swiss Court ordered that the tax office could not give American authorities information on a Credit Suisse’s U.S. clients, because the request was allegedly made on a suspicion of tax evasion without specifying the name of the suspected tax cheat. The decision is final.

The U.S. and Swiss governments have been in extended negotiations over methods by which the Swiss could turn over information from Swiss banks on U.S. depositors.  The Swiss are anxious to resolve the issues, because Swiss banks and bankers are being indicted in the U.S. for assisting U.S. taxpayers to evade and avoid paying U.S. taxes by using Switzerland as a depository for pre-tax dollars.  Switzerland’s Federal Administrative Court ruling will likely raise the tension between the U.S. and Swiss negotiators and make further negotiations difficult given the limitation now imposed on the Swiss banks’ ability to release information regarding U.S. taxpayers.


Bob Gabrielski contributed to this post.