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| Spoils all around |
| Jeffrey Goldfarb / Aug 18, 2009, 00:31 IST |
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UBS: It looks like everybody wins in the UBS tax case. Compromises will afford the Swiss, Uncle Sam and the world’s largest wealth manager the opportunity to claim victory as the saga at last reaches its denouement.
Accusations that UBS encouraged American clients to avoid paying taxes had become a matter not only for the courts but for US-Swiss diplomacy. The two countries signed a deal last week, which should be unveiled shortly. But pertinent details are already trickling out.
UBS is expected to get off without further fines, beyond the $780 million assessed in the related criminal prosecution. The US government no longer blocks the strategic path. And with the tax case settled, the Swiss government is expected to offload its 9.3 per cent stake in the country’s largest bank. Still, the cost is huge: a badly damaged franchise in private banking and local politicians seeking fraud charges against former chairmen.
The US government’s doggedness should bear bountiful fruit. It is expected to get the details of some 5,000 of the 52,000 UBS account holders suspected of dodging US taxes. Early estimates suggest the disclosed customers will pay fines totalling nearly $4 billion.
Hundreds more frightened of being unmasked have already come forward — and many more are expected to follow suit under a fresh offer of modest leniency. US tax officials are reported to be collecting 40 per cent of an account’s value from confessors — and seeking more than double from those it catches.
The Swiss government emerges victorious by apparently not being forced to change the law. It seems the names will be turned over on suspicion of already-illegal tax fraud, rather than tax evasion, which isn’t a crime in Switzerland. But the Swiss public will probably still accuse the government of capitulation to a fishing expedition that threatens the country’s vaunted network of smaller private banks.
Even some tax cheats will find comfort in cracks created by the pursuit of middle ground. After all, the names of 90 per cent of UBS clients from the US won’t be turned over, and the ones to be disclosed can be challenged in Swiss courts. Tax authorities are limited, regulators are distracted and tax rates are rising. The evaders can find their own small victory here too - they’ll just be the only ones not to crow about it.
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