The government has decided to sign a controversial deal with the United States aimed at cracking down on wealthy American tax dodgers. The accord further undermines Switzerland’s tradition of banking secrecy.
The Foreign Account Tax Compliance Act (Fatca) obliges foreign firms to report offshore accounts by US tax payers that amount to more than $50,000 (SFr45,943).
Finance Minister Eveline Widmer-Schlumpf told a news conference on Wednesday that Switzerland would agree to a bilateral deal with the Internal Revenue Service (IRS) which allows for certain exceptions, notably for the Swiss insurance sector, pension funds and the Swiss National Bank.
Switzerland is set to become only the second state behind Japan to opt for this type of agreement, while most other nations are reportedly willing to sign a standard agreement.
Widmer-Schlumpf made no bones that the cabinet struggled to take a decision.
“Fatca is not something to rejoice about. But it is a pragmatic solution,” she said.
Swiss banks active in international financial markets have no choice but to apply the US rules, according to Widmer-Schlumpf.
The documents are to be signed in Bern in the “next few days” and further details of the accord will be published thereafter.
Parliament still has to discuss the issue, after which the agreement can come into effect in theory at the beginning of 2014.
In an initial reaction, the rightwing Swiss People’s Party said it reserved the right to reject the Fatca deal. It accused Washington of imposing its laws outside its own borders and lacking respect for the sovereignty of other states.
Widmer-Schlumpf said negotiations with Washington on a global settlement for outstanding tax issues were still underway but she refused to elaborate.
The finance minister added the US authorities had given assurances that acceptance of the Fatca deal would be considered beneficial to speed up a global deal for Switzerland’s financial sector.
The government has been trying to strike a deal for about a dozen Swiss banks which risk court proceedings in the US over illegal tax practices.
Widmer-Schlumpf said the Fatca deal could also put more pressure on Switzerland to accept the automatic exchange of bank data with the European Union.
Until now Switzerland has refused to cave in to demands from Brussels, saying bilateral agreements with individual EU member states on a withholding tax were more practical.
Accords with Britain and Austria came into force at the beginning of the year. A similar deal with Berlin was rejected by the German parliament. Negotiations with a number of other countries are pending.