I wonder if a bunch of those clients of UBS (NYSE: UBS) based in the United States are kicking themselves over rushing and offering themselves up on the amnesty last year, as the top Swiss court dealt a blow to the agreement with the U.S. by announcing that under Swiss law it’s not considered fraud to not declare assets in what the United States considers a proper manner.
This centered around the behavior of an UBS client who didn’t fill out a particular supplementary U.S. tax form, which was part of an appeal which the court was taking under consideration and ended up ruling on in this clients’ favor.
Consequently, now the questions arise of how this will effect the immediate concern over 26 people who had accounts at UBS and were suspected of cheating on their taxes, and in the long run, how this will impact the 4,400 other Americans who has Swiss bank accounts and were under suspicion of hiding their tax responsibilities.
The official finding by the Swiss Federal Administrative Tribunal was the failure to fail out the tax form wasn’t considered an attempt to defraud the U.S. government, and so to allow the records to be sent is no longer a possibility after the ruling of the highest court in Switzerland.
I was hoping this would happen, and would have really been surprised if it hadn’t, as the Swiss government seemed to cave far too easily in response to the pressure from the U.S. government, and I would be willing to bet came under enormous internal and international pressure by clients from other countries who were attempting to follow in the footsteps of the U.S. once the door was opened for interference in the Swiss banking system, which is an integral part of the country’s economics and financial well-being, and could have had a destructive long-term effect on the health of the country in the future.
While the Swiss and the U.S. have a treaty where the secrecy rules can be lifted in specific fraudulent cases, what this means is the failure to fill out supplementary U.S. tax forms aren’t one of them under Swiss law. In other words, the Swiss don’t consider this evidence of frauduland behavior.
After the ruling, further instruction was given to tax authorities in Switzerland to reassess the case of the 26 people related to the case, including the specific woman who had appealed the former decision to release her records.
How the Swiss court made their decision was based on the distinction in Swiss law between fraud and evasion. The failure to fill out and file what is called a W-9 form in the U.S. isn’t considered fraudulent in the opinion of the Swiss court.
It’ll remain to be seen what type of impact this will have on the approximate 4,400 other people who are awaiting to see whether their records will be sent to the U.S.
The decision by the Swiss Federal Administrative Tribunal is final and has no further recourse to be appealed.
