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Increased pressure by US tax authorities will disturb markets, expert

By Rashmi Kumar

The US government needs to avoid overstepping the limitations of the tax treaty signed with Swiss authorities or risk causing disturbances to the financial markets, according to a top investment expert.

Steffen Binder, research director at Switzerland’s MyPrivateBanking, told CampdenFB: “If the US tax authorities threaten criminal charges again to get access to information on tax evaders with Swiss accounts, it will heavily unsettle the financial markets. The event with UBS was a special case and one that should not be repeated.”

His comments follow reports by the Swiss media that the Alpine country has not supplied any client names to American regulators yet, despite an ultimatum of 6 September set by the US.

According to a report in Agence France-Presse, Switzerland’s president, Micheline Calmy-Rey, said: “No data on clients of the banks has been transmitted to the United States. For Switzerland, any exchange of information on client data is only possible if it is based on existing legislation.”

Binder reckons Switzerland will do all it can to avoid introducing emergency legislation as it did to settle the US investigation into UBS in 2009.

“The Swiss government is not inclined to repeat the same situation as with UBS. Its position is quite clear – the information has to be within the limits of the tax agreement signed with the US in 2009. It is no longer a matter of banking secrecy, but more about giving the US statistical data about money coming in,” he said.

The Swiss authorities were forced to reveal details of around 4,500 UBS clients to avoid criminal action against the bank in 2009. Following that, Switzerland and the US signed a double taxation treaty, with the aim of making the extent of black money coming into the country from the rich in the US more transparent.

According to reports, the US has also asked for an estimate on the amount of assets held by US residents in secret accounts at Swiss banks, which the government in Switzerland is willing to provide. Local newspaper TagesAnzeiger said a survey by Swiss market authorities found between €14 billion and €21 billion held by thousands of US clients in Swiss banks.

Reports further said that the US appears to be pushing for more information than currently allowed under the treaty. It is said to be seeking details of all American clients with accounts worth at least $50,000 between 2002 and 2010 at banks including Credit Suisse, Julius Baer and Wegelin as well as a number of Zurich and Basel cantonal banks.

“The Swiss government will insist on handing out information only in accordance with the treaty. The big question is what will happen next – if the financial authorities receive the data they need, what kind of steps they will take against banks is very important,” said Binder.

The investigation is part of the US government’s ongoing probe into Swiss private banks, in an attempt to find Americans who are hiding money in overseas accounts – US law states the Internal Revenue Service must be informed of offshore accounts holding more than $10,000 (€7,100).