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UBS AG : Swiss Government Sets Parameters to Settle US Tax Dispute

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07/03/2013 | 10:09am EDT
   By John Letzing and John Revill 
 

ZURICH--The Swiss Cabinet agreed Wednesday to a new plan for resolving disputes between the country's banks and U.S. authorities cracking down on offshore tax evasion raising hopes the long-running dispute could be drawing to a close.

In a statement, the Federal Council said it had designed a framework that would allow Swiss banks to cooperate with U.S. authorities investigating possible tax evasion by wealthy Americans.

Banks would apply individually for permission to work with U.S. authorities to resolve the tax disputes, according to the statement. The plan protects bank employees and other third parties.

The Federal Council plan doesn't allow for Swiss banks to pass client information on to U.S. authorities.

The new plan, using existing Swiss law, comes after Swiss politicians spent much of June debating to what extent the country should accommodate U.S. authorities tracking down undeclared assets stashed in the Alpine nation by Americans. An earlier plan proposed by the Swiss Cabinet would have enabled banks not already cooperating with the U.S. to hand over information about their past dealings with American clients, which would have helped resolve some outstanding issues for the country's financial sector.

But the Swiss Parliament rejected the proposed plan amid objections it represented an infringement of Swiss sovereignty by the U.S., was excessively vague and presented potential legal hazards not only for the country's bankers but also for attorneys and advisers who have assisted Americans in the past.

The rejection has caused some anxiety in Switzerland, where officials have signaled concern the U.S. may again begin indicting banks and imposing fines if the government here doesn't facilitate a resolution.

With Wednesday's announcement, Swiss politicians have indicated they still hope to provide a framework for many of the country's more than 300 banks to settle matters with U.S. authorities.

The Swiss Bankers' Association said it welcomed the outcome, saying it would "finally create legal certainty" for Swiss banks.

The Swiss government also said further talks are underway with the Department of Justice concerning a U.S program to settle potential claims against Swiss banks which are not yet under investigation.

About a dozen Swiss banks are already under investigation in the U.S. and are providing information to authorities there, including Credit Suisse Group AG (CSGN.VX) and Julius Baer Group AG (BAER.VX). UBS AG (UBSN.VX), the country's biggest bank, reached a deferred prosecution agreement with the U.S. Department of Justice in 2009. UBS admitted helping Americans avoid taxes and paid a $780 million fine.

Wegelin & Co., Switzerland's oldest bank, pleaded guilty earlier this year in a New York court to helping U.S. clients evade taxes and is now defunct.

Write to john.letzing@wsj.com john.revill@dowjones.com

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