UBS And US Sort Of Wrap Up Their Tax Beef
The dispute between UBS and the American tax man, where the US wanted names of account holders it said were avoiding paying tax and UBS not giving them on account of honouring Switzerland’s right to anonymous banking, has finally been thrashed out in court. We won’t know how many names have been handed over to the US until next week, but right now estimates range between 5,000 and 10,000. Not quite the 52,000 the US was asking for, but still a juicy amount of future litigation.
Lawyers working on the case said there were five types of account holder with UBS who could have had their names revealed – US citizens evading income tax, multinational citizens who use Swiss banks as a quiet and stable base for their funds, people protecting their assets from lawsuits or divorce proceedings, Holocaust survivors who used Switzerland to hide their assets, and criminals who use the accounts to channel and launder funds through. The Swiss previously said they were more open to revealing this latter group, as banking secrecy laws don’t extend to frauds and other dodgy folk – so we can probably expect a fair few of the mere income tax evaders to remain anonymous.
It brings to an end a massively protracted diplomatic nightmare, in which the US managed to get 250 names through a clerical ball-dropping by the Swiss, resulting in the arrest of some yacht-owning, society-ignoring chumps. Except that it probably isn’t the end at all, as the “victims” of this name-revealing can appeal in the Swiss courts, though based on their previous idiocy, we can expect someone to publish the names and account information anyway during the appeal process and see the US pursue them anyway.
What is certain though is that the US “can indict UBS or throw UBS out of the country” according to one lawyer not associated with the case; with UBS’s name so damaged in the States they’re going to massively retreat from that market. Oswald Grubel, the chief exec, said that they were looking towards Eastern markets instead where “the reputational issue doesn’t weigh at all”. Meanwhile one of the prosecution lawyers told the WSJ that this was just the beginning for the US – “If the U.S. wants to end this activity in Switzerland, as it clearly does, it will not stop with UBS”.
It’s going to be tricky. Obviously Switzerland has the right to maintain its own laws, and to steamroller them does set an uncomfortable precedent. On the other hand, Swiss banking secrecy is a terrible law these days. It was borne out of rich French aristos wanting to protect their assets abroad, but became somewhat more legitimised when it passed into law to protect Jewish investors from the Nazis. Now that threat has long passed, it’s passed back to its original, millionaire-protecting roots. While demanding that Holocaust victims have their secret banking rights surrendered is clearly a sensitive area, the bigger picture here is the billions in lost tax revenues for the US. The US can afford to play diplomatic hardball on this issue – it’s one of the few foreign interventions that most sane people would actually have faith in them undertaking.