Of Special Interest

22nd November 2011

Swiss / US comprehensive tax treaty

The Swiss parliament is thought likely to agree the plan which would pass names of possible US citizens with Swiss bank accounts and thought likely to be evading US tax based upon bank transaction behaviour patterns. The agreement could bring to an end the long running dispute between the countries which has been pursued increasingly aggressively by the US.


In a final, but minor defiance the Swiss parliament has scheduled the debate on the subject next spring as opposed to the before Christmas slot that the Swiss and US negotiators had hoped for.


Swiss bank privacy laws prevent tax authorities from accessing bank account details in normal circumstances whether Swiss or foreign. Tax authorities have always had the right to seek a warrant giving them access to this information where they suspect deliberate tax evasion, which is an offence in Switzerland. The problem for the US authorities is that they need the identity of the US citizen with a Swiss bank account and to show a basis for their belief of tax evasion. General 'trawling exercises' are not allowed. The new proposal would look for certain suspicious behaviours in account usage and details for these customers could be passed to the US authorities within this interpretation of the law. The IRS could then get the necessary court authority for access as a largely automatic process.


The US actions have been sufficient that most Swiss banks will not now retain US customers unless they can provide evidence the account is declared to the IRS. The proposed deal is unlikely to be sufficient for the US in the longer term but may at least give the two sides a respite. In addition to the actual information gained from the Swiss the high level of publicity in the US given to the pursuit of the tax evaders is designed to put off would be tax evaders from attempting the offence and the IRS has had some success in gathering voluntary admissions by offering lower penalties for those who confess before being caught.