Swiss parliament agrees to turn suspected tax cheats in to IRS

By Eliane Engeler, Associated Press Writer

GENEVA — The Swiss parliament on Tuesday approved a treaty with the United States that will hand thousands of files on suspected tax cheats to U.S. authorities, but obstacles remain that could delay the deal for several more months.

The government hopes the agreement will eventually end UBS's three-year battle with U.S. tax authorities that culminated in revelations that the back had helped American clients hide millions of dollars in offshore accounts.

After a treaty was painstakingly crafted by Bern and Washington last year after months of negotiations, Switzerland agreed to divulge the names of 4,450 UBS clients suspected of tax evasion.

Swiss authorities have already transmitted the names of about 400 UBS clients who signed waivers as part of the Internal Revenue Service's voluntary disclosure program, according the Swiss Federal Tax Administration. A further 100 UBS clients gave their consent directly to Swiss authorities.

Lawmakers in Switzerland's lower house voted 81 to 61 in favor of the government-backed deal, and 53 abstained.

The vote passed after the powerful Swiss People's Party dropped its opposition. The nationalist party and the left-wing Social Democrats blocked a first attempt last week to have parliament approve the treaty, which has been portrayed by some as a nail in the coffin for Swiss banking secrecy.

FLASHBACK:Swiss reject tax-cheat deal with U.S.

But details remain to be ironed out that could yet hold up the deal.

Parliament's lower house decided Tuesday that the treaty can be put to the Swiss public in a referendum before it finally becomes law. The upper house has yet to approve such a referendum and has until Friday to deliberate.

A popular ballot would make Switzerland miss a late August deadline to hand over all 4,450 names because the vote would be held in November at the earliest.

The deal is crucial to UBS, which has faced intense pressure from U.S. authorities since 2007. Last year the bank agreed to turn over hundreds of client files and pay a $780 million penalty in return for a deferred prosecution agreement. But Washington has signaled that unless UBS reveals the further 4,450 American names demanded in the U.S.-Swiss agreement, it may face a crippling civil investigation just as the bank is recovering from the subprime crisis and seeking to rebuild its U.S. business.

UBS spokesman Jean-Raphael Fontannaz said the bank will not comment as long as the decision-making process in parliament is still ongoing.

Justice Minister Eveline Widmer-Schlumpf tried to disperse fears of some lawmakers that the treaty might open the door to the United States — or other countries — receiving client data from other Swiss banks.

"This is about a single agreement ... on a clearly defined group of clients who allegedly committed tax fraud or tax evasion," she told parliament, adding that it will have "no impact on future cases."

Widmer-Schlumpf said she was confident that the United States would accept a delay in handing over the names if the Swiss people were asked to vote on the deal in a referendum.

The Swiss business organization economiesuisse said Tuesday's vote was an important step for Switzerland and showed it was living up to its commitments to the United States.

Business groups have warned that failure to ratify the deal risked losing thousands of jobs should Washington decide to retaliate.

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