An agreement to settle a long-standing tax evasion suit between Swiss banking giant UBS and the U.S. Justice Department has received mixed reviews in Switzerland. Swiss media disagree on the potential consequences of the deal. But all agree that Switzerland's status as a "tax paradise" is over.
Swiss banking giant UBS has been fending off demands by the U.S. Internal Revenue Service to hand over information about 52,000 wealthy American clients suspected of tax evasion. The legal wrangling, which has been going on for months has threatened to poison diplomatic relations between two strong allies.
But now a deal has been struck. Terms of the agreement are still confidential. But Swiss-American Chamber of Commerce CEO Martin Naville says he is relieved the uncertainly hanging over the protracted negotiations are over and UBS now can get on with its business of banking.
"Even a day in court would have been extremely detrimental to the future of UBS," Naville said. "And so I think avoiding court is great. We will have to see in the details of the agreement to see exactly how much ground they had to give in the negotiations. But, clearly this is positive for UBS."
The U.S. Justice Department filed a civil lawsuit against UBS in February demanding details of 52,000 American clients. The Swiss government has vigorously rejected these demands, saying it violated the country's banking secrecy laws.
Media reports indicate that under the compromise agreement worked out, UBS will agree to release data on around 5,000 people on the American list, probably those with the largest accounts.
Naville agrees banking secrecy in Switzerland will never be the same. He says innocent citizens do not have to worry about having their financial data kept confidential. But anything tainted with the whiff of tax evasion will be at risk.
"The UBS case was a very brilliant case for the IRS to make the point and to motivate all Americans to really to come back into the fold, to have voluntary disclosure and make the payments," Naville said. "I think the IRS has beautifully achieved those goals ... It is the IRS trying to terrify the American citizens to do the right thing. But, also, you know, make very clear to banks worldwide and tax experts and lawyers worldwide never to try again to help Americans evade tax. Even if it is legal today, the clear message was it is not going to be legal tomorrow. So, do not do it."
Ultimately, Naville says UBS had no choice. It had to give in to Washington's demands. He says any bank that wants to be an international player has to do business in the United States, which is at the absolute center of the world's financial markets.
Representatives from the U.S. Justice Department and UBS have told the sitting judge in Miami, Florida they would move to have the legal case dismissed and would file court documents outlining the settlement next week.