Swiss parliament approves US tax deal

The Swiss parliament on Tuesday approved a treaty with the United States (US) that will hand thousands of files on suspected tax cheats to US authorities, but obstacles remain that could delay the deal for several more months.

The government hopes the agreement will eventually end UBS AG's three-year battle with US tax authorities that culminated in revelations the bank had for years helped American clients hide millions of dollars in offshore accounts.

Under the treaty that was painstakingly crafted by Bern and Washington last year after months of negotiations, Switzerland has agreed to divulge the names of 4,450 UBS clients suspected of tax evasion.

Swiss authorities have already transmitted the names of about 400 UBS clients who signed waivers as part of the Internal Revenue Service's voluntary disclosure programme, according to the Swiss Federal Tax Administration.

A further 100 UBS clients gave their consent directly to Swiss authorities.

REFERENDUM

Lawmakers in Switzerland's lower house voted 81 to 61 in favour of the government-backed deal, and 53 abstained.

But details remain to be ironed out that could yet hold up the deal.

Lawmakers decided Tuesday that the treaty can be put to the Swiss public in a referendum before it finally becomes law. The upper house has yet to approve such a referendum and has until Friday to deliberate.

A popular ballot would make Switzerland miss a late-August deadline to hand over all 4,450 names because the vote would be held in November at the earliest.

The deal is crucial to UBS, which has faced intense pressure from US authorities since 2007. Last year, the bank agreed to turn over hundreds of client files and pay a US$780 million penalty in return for a deferred prosecution agreement.

But Washington has signalled that unless UBS reveals the further 4,450 American names demanded in the US-Swiss agreement, it may face a crippling civil investigation just at a time when the bank is recovering from the sub-prime crisis and seeking to rebuild its US business.

- AP