The lower house of the Swiss parliament has voted to reject the agreement with United States authorities that would resolve the legal troubles facing UBS.
On June 8, 2010, Swiss lawmakers voted against the measure. Lawmakers also voted in favor of putting the agreement to a referendum.
The rejection is not the final word on the agreement in the Swiss parliament, but it is expected to delay approval.
The August 19, 2009, agreement, which would permit the disclosure of client data on 4,450 UBS accounts to settle the U.S. John Doe enforcement action, passed the upper house of parliament June 3 and now returns to the upper house as the two chambers resolve their differences. A final vote is expected to take place before the end of the current parliamentary session on June 18.
Should the lower house insist on a referendum process, the agreement would be delayed for at least 100 days and would breach the August deadline for disclosures to be made under the agreement.
Parliamentary approval of the agreement is necessary following a January 21 decision by the Swiss Federal Administrative Court, which ruled that the agreement was insufficient to change the interpretation of “tax fraud and the like” in the Switzerland-U.S. tax treaty. Approval by the parliament would elevate the agreement to the level of a treaty and permit the government to complete the administrative assistance process.
The IRS responded to the news of the vote with a statement that it is ready to “pursue all legal options” if the Swiss government is unable to fulfill its commitments under the agreement.
“We have an agreement with the Swiss government. We expect that the Swiss government will continue to honor the terms of the agreement. We continue to monitor the events in Switzerland, and we stand ready to pursue all legal options available to us should the Swiss fail to provide the required information,” IRS spokesman Frank Keith said on June 8.
Sen. Carl Levin, D-Mich., chair of the Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, also responded in a June 8 press release, saying that “the United States should reject any further attempts by the Swiss to delay the UBS case.”
“It is time to move forward with the summons in court and force UBS to provide the names and account information for all 52,000 suspected U.S. tax cheats,” Levin said.
Senate Finance Committee ranking minority member Chuck Grassley, R-Iowa, responded to the agreement’s rejection by asking the IRS to explain what steps it has taken to identify UBS account holders using information provided by former UBS employee Bradley Birkenfeld.
“While I understand that today’s vote in the lower chamber of the Swiss Parliament is not the final word, I am worried that the Internal Revenue Service (“IRS”) is doing next to nothing to identify tax evasion by U.S. taxpayers utilizing these accounts while waiting for ratification of the treaty,” Grassley wrote in a June 8 letter to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman.
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