Last Friday, a Swiss court ruled against the transfer of data of American clients of UBS AG (UBS). This ruling has raised doubts about the settlement that had enabled the US authorities to get the details of alleged tax-evading American clients of UBS AG.
According to the ruling, if a client fails to fill out a W-9 form in the U.S. to declare the funds, the failure is not considered a tax fraud in Switzerland. Hence, the detail of these clients won’t be handed over to the U.S. authorities.
However, this Wednesday, the Swiss government will decide about the ways to guarantee the implementation of Switzerland’s and the U.S.’s agreement.
In August 2009, UBS agreed to disclose account details of 4,450 American clients who have allegedly evaded taxes. Swiss banks such as UBS AG have enjoyed large foreign deposit inflows over the years as a result of the country’s tax system, which emphasizes extreme secrecy.
However, the adoption of the Organization for Economic Co-operation and Development standards for tax cooperation coupled with the U.S. Internal Revenue Service’s lawsuit against UBS has led to a dilution of secrecy in this instance. The company is experiencing large fund outflows as worried investors eye a safer refuge.
UBS’s third quarter results were disappointing as the company reported its fourth consecutive quarterly loss. The ongoing global economic turmoil severely hurt the Swiss banking major’s balance sheet when the subprime crisis led to record losses.In addition, the issues emanating from the dilution of Swiss banking secrecy will significantly challenge the company’s return to profitability.
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