Swiss parties edge closer to ratifying US tax deal

By FRANK JORDANS Associated Press Writer

GENEVA (AP) - Swiss lawmakers have signalled their willingness to compromise in a long-running dispute over whether to give the United States files on thousands of suspected American tax cheats.

"We're prepared to talk," Ursula Wyss, a key figure in the left-wing Social Democratic Party that voted against the U.S.-Swiss treaty last week, was quoted as saying by Swiss weekly SonntagsBlick.

Swiss People's Party lawmaker Bruno Zuppiger called for an end to the "dishonorable spat" between those in favor and those against the deal, telling Zurich-based SonntagsZeitung: "For economic and political reasons we have to bite the bullet" and approve the treaty.

Zuppiger's nationalist party also had voted against the treaty after its demands for amendments weren't met, but their ranks appeared to be splitting ahead of Tuesday's second - and possibly final - ballot in Switzerland's lower house.

The votes of the two parties were enough to block approval last week for a deal the government had hoped would end, once and for all, the threat of prosecution looming over Swiss bank UBS AG if the country refuses to honor its agreement to hand over the names of 4,450 U.S. clients.

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 to a spokeswoman for the Swiss Federal Tax Administration.

Another 100 UBS clients gave their consent directly to Swiss authorities, Esther Schoenenberger Bloch told The Associated Press on Monday.

The remaining 3,950 files - of which 2,400 have already been processed - will be held back until the Swiss parliament approves the deal, which was painstakingly crafted by Bern and Washington last August after months of negotiations.

Even if it passes, those affected can still appeal to the Swiss courts to prevent their names being revealed to the IRS.

Switzerland's strict banking secrecy laws normally forbid handing customer details to foreign authorities, except when there is evidence of outright tax fraud - a difficult case to prove when client files are kept strictly confidential.

Switzerland agreed to make an exception to this rule in order to prevent further prosecution of UBS in the United States.

Last year UBS agreed to turn over several hundreds client files and pay a $780 million penalty in return for a deferred prosecution agreement, after admitting that it had for years helped U.S. clients hide money from the IRS using offshore accounts.

Washington has repeatedly stated that it has faith the Swiss government will deliver on its promise to ensure all 4,450 further names are divulged by August.

That deadline could be missed even if lawmakers give their consent to the deal Tuesday.

Under Switzerland's traditional system of grassroots democracy, voters may be asked to approve the decision in a referendum, which would happen in November at the earliest.

Swiss business and banking representatives have appealed to lawmakers to put aside their differences and vote 'yes' to avert retaliatory action by the United States.

SGV, the umbrella organization of small and medium enterprises in Switzerland, said tens of thousands of jobs could be at risk.

"It is clearly in UBS's and Switzerland's interest that the treaty is agreed," Helvea analyst Peter Thorne wrote last week, noting that large Swiss companies make between a quarter and half of their revenue in the United States. "Even if some parliamentarians do not want to help UBS, then surely they do not want to harm the bank at such potentially serious cost to the rest of Switzerland."

Should the vote pass, fresh threats to Swiss banking secrecy are already on the horizon.

Germany has been cracking down on its citizens who hide money in Swiss accounts, going so far as to buy CDs containing client names stolen from Swiss banks.

And according to Swiss paper NZZ am Sonntag, Brazil earlier this month put Switzerland on a blacklist of tax havens, specifically citing the holdup in the UBS case as a reason for paying closer attention to possible tax evasion practices by Brazilian and Swiss companies.