Swiss lawmakers demand concessions ahead of key vote on deal with US over UBS tax evasion row

Crunch vote looms for Swiss-US deal in UBS tax row

GENEVA — The Swiss government is hoping to rid itself of a long-running headache over banking secrecy Tuesday when lawmakers are expected to approve a treaty to hand files on thousands of suspected tax cheats to U.S. authorities.

A standoff among lawmakers, courts and the government has held up ratification of the deal that Swiss and U.S. authorities signed in August to lift the threat of U.S. prosecution from Switzerland’s largest bank, UBS AG.

The hoped-for resolution may yet be stalled as members of the nationalist Swiss People’s Party and the left-of-center Social Democrats demand concessions in return for their consent.

The debate in Switzerland’s lower house — or National Council — starts Monday.

If the option favored by government and centrist parties is passed it would spell the end of UBS’s three-year battle with U.S. tax authorities that culminated in revelations the bank had for years helped American clients hide millions of dollars in offshore accounts.

Social Democrats have said they will only agree if the government makes a binding commitment to tax bankers’ bonuses. Such a tax is opposed by the powerful People’s Party, which instead wants the deal with Washington put before voters in a national referendum — a nod to Switzerland’s unique system of grassroots democracy that could further delay passage of the agreement. Support of at least one of the two parties is necessary for a parliamentary majority.

The deal is crucial to UBS, which has faced intense pressure from U.S. authorities since 2007. Last year the bank agreed to turn over hundreds of client files and pay a $780 million penalty in return for a deferred prosecution agreement. But Washington has signaled that unless UBS reveals a further 4,450 American names demanded in the U.S.-Swiss agreement, it may face a crippling civil investigation just at a time when the bank is recovering from the subprime crisis and seeking to rebuild its U.S. business.

A parliamentary report publishedheavily criticized the cabinet for its handling of the UBS affair and suggested that at one point the bank was in such deep trouble a foreign buyout was being considered.

The deal goes far beyond other compromises Switzerland has made in recent years to fend off demands by Germany, France, the United States and others for an end to its treasured banking secrecy rules. Last year the government agreed to do away with the difference between tax evasion and tax fraud — a key legal distinction that has allowed foreigners with accounts in Switzerland to avoid having their details handed over to investigators back home.

Even if the vote passes in the government’s favor, Swiss banking secrecy already faces a new threat.

Credit Suisse, Switzerland’s second-largest bank, said in April that it believes client files were stolen from its computers and handed over to German authorities, who are now investigating possible tax evasion.