JURIST - Paper Chase: Switzerland court rejects US request for bank data

[JURIST] The Swiss Federal Administrative Court (FAC) [official website, in German] on Wednesday ruled [press release, PDF] that Switzerland is not permitted to give the US Internal Revenue Service (IRS) [official website] a Credit Suisse client's account information. In a ruling that cannot be appealed, the court concluded that, because the IRS had requested information about a bank account holder for whom it merely had a suspicion of tax evasion, Credit Suisse rightfully withheld the information. Further, the IRS had failed to include the account holder's name in its request. Unlike in the US, tax evasion is legal in Switzerland [Reuters report]. As such, Americans have been keeping money in Swiss bank accounts. The IRS has accused Credit Suisse of assisting their clients, who are subject to US tax law, in concealing their income and assets. The two countries are currently working to cooperate in enforcing their respective laws.

This ruling comes as the US seeks to put an end to tax-evasion through the use of overseas accounts. In January 2010, the FAC ruled [JURIST report] that the Swiss Financial Market Supervisory Authority (FINMA) [official website, in German] violated the law in February 2009 when it ordered UBS [corporate website] to disclose information to the US on more than 250 of the bank's clients. In November 2009, the US Department of Justice (DOJ) [official website] and the IRS announced [JURIST report] that more than 14,700 Americans have reported to the IRS previously hidden overseas bank accounts in response to a temporary forgiveness program [official website], allowing delinquent taxpayers to avoid criminal prosecution for tax evasion by paying all overdue taxes and penalties. In September 2009, the US and Switzerland signed a treaty [JURIST report] that would increase the amount of information shared between the two nations on would-be tax evaders. The agreement, constructed in accordance with Article 26 of the Model Tax Convention [text, PDF], came one month after a Swiss banker and lawyer were indicted in US federal court [JURIST report] for helping clients hide assets. Earlier in August of that same year, the US reached a preliminary agreement with Switzerland over the identification of anonymous accounts [JURIST report] in Swiss banks, which would aid US officials in identifying those who seek to evade taxes.