Swiss bank expects to be fined in US tax case

EU official urges an end to secrecy

Steffen Schmidt/Keystone via Associated Press

Boris Collardi, Julius Baer’s chief executive, said he was unable to predict the size of any fine his bank might face in the United States, and whether Julius Baer might face legal action.

GENEVA - Swiss bank Julius Baer Group said yesterday that it might have to pay a fine to settle allegations it helped American clients cheat on their taxes, but cautioned investors that the final outcome of the case was still uncertain.
Zurich-based Julius Baer is one of at least 11 Swiss banks under pressure from the United States to give up tax-evading American customers and the bankers who aided them. Last month, Switzerland’s oldest bank, Wegelin & Co., announced it was selling most of its business after it was indicted in the United States on charges of conspiring to help American clients hide more than $1.2 billion from the Internal Revenue Service.
“We’re in ongoing full cooperation and dialogue with the US authorities and we’re confident and committed that we will find a solution,’’ Julius Baer’s chief executive, Boris Collardi, said during the presentation of the bank’s full-year results yesterday.

Collardi said he was unable to predict the size of any fine his bank might face in the United States, and whether Julius Baer might face legal action.

“We have not made any provision with regard to the US because we can’t reliably assess how much a related payment would be at this stage,’’ he said.
“There is no indication of an indictment nor do we expect this to change in the wake of the Wegelin situation,’’ he added.
The US investigation against Julius Baer and other Swiss banks follows the successful case against UBS AG, which culminated in Switzerland’s biggest bank having to pay a $780 million fine and hand over 4,450 clients’ files to Washington in 2010. Since then, an amnesty program and the arrest of several Swiss bankers have given US authorities ample ammunition to pursue some of the country’s other banks.
As part of their case against the Swiss banks, US authorities have demanded detailed information about their past business operations in the United States.
Also yesterday, European Union tax commissioner Algirdas Semeta said Switzerland must eliminate banking secrecy and renegotiate tax accords with Britain and Germany that clash with regional initiatives.
While Switzerland agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development, bilateral agreements signed in September with Germany and Britain allow client identities to remain secret.
“Banking secrecy that allows companies or individuals to hide taxes has no future,’’ Semeta said in an interview in Brussels, adding that he wants to crack down on EU citizens using Swiss bank accounts to hide money. “If we knew the exact amount of tax evaded, we would present a bill to Switzerland.’’
Britain and Germany have adopted withholding tax accords proposed by Swiss bankers. Those deals “entrench Swiss banking secrecy,’’ the London-based Tax Justice said in an October study, which put the Alpine country at the top of a financial secrecy index.
Semeta, a former Lithuanian finance minister, has helped stall the bilateral tax agreements struck by Britain and Germany by ordering the two countries to redraft segments that clash with EU rules.
Going forward, Swiss banks plan to levy a 26.375 percent withholding tax on interest, dividends, and capital gains earned by Germans with offshore accounts. Revenue generated will go to the German treasury.
That agreement, based on the so-called Rubik model, is threatened by resistance from the German Social Democratic opposition, according to the Tax Justice Network.
Under a similar British-Swiss accord, Swiss banks will levy a withholding tax of 48 percent on interest income and 27 percent on capital gains earned by Britons with offshore accounts.