TAX NEWS - JUNE 2010

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Swiss Tax: Swiss Lawmakers Reject UBS Tax Deal

The lower house of the Swiss Parliament voted Tuesday to reject a deal with the United States to transfer bank data from 4,450 American clients of UBS suspected of tax evasion, calling into question the future of the carefully negotiated agreement.

UBS, the largest Swiss bank, is trying to end a tax conflict with the U.S. Department of Justice that has already cost it $780 million in fines over charges that it helped Americans avoid billions of dollars in taxes.

The Swiss agreed with the United States last August to disclose the names and account details to put an end to prosecution that has weighed on both UBS and the Swiss financial markets, and to end what they described as a "fishing expedition" for details on 52,000 accounts. But the government had to take the matter to Parliament in February after a court said the agreement violated national laws governing banking secrecy.

Under Swiss law, tax fraud is a criminal offense, while tax evasion is a civil matter, a distinction not shared by the United States and most other countries.

Lawmakers in the lower house, the National Council, rejected the deal Tuesday by a margin of 104-76, with 16 abstentions. They also voted to send the measure to a referendum if necessary.

The Council of State, the upper house, last week voted in favor of the deal and against a referendum. The two houses will begin Wednesday to try to reconcile their differences. They have until June 18 to reach agreement before the end of the parliamentary session.

The Swiss government is hoping it can honor an August deadline to hand over the client data.

Parties on both the left and right have sought to tie the UBS case with broader financial reforms, particularly in the areas of so-called too-big-to-fail institutions, banker bonuses and market regulation. That appeared to be the reason the vote failed Tuesday, as both the People's Party and the Social Democrats — the two largest parties — opposed the measure.

Serge Steiner, a UBS spokesman in Zurich, declined to comment, noting that the final vote on the matter was yet to come.

Shares of UBS fell 2.7 percent in Zurich morning trading. They are down more than 10 percent this year.
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