The Swiss government said today it had signed a controversial deal with the United States requiring all Swiss banks to report the holdings of their US clients to US tax authorities.
The agreement, which was initialled in Washington last year, aims to simplify Switzerland’s implementation of the US Foreign Account Tax Compliance Act (FATCA), a source of dispute between the two countries since it was announced in March 2010.
The deal was signed in Bern by State Secretary Michael Ambuehl, in charge of financial and taxation issues, and US ambassador Donald Beyer, but still needs to pass through the Swiss parliament and could be subject to a popular referendum, the government said in a statement.
It stressed though the importance of the deal going into effect when the United States begins phasing in FATCA on January 1, 2014 to avoid penalising Swiss banks on the US market.
And it said it planned to fast track the agreement through the usually slow parliamentary process.
Swiss Finance Minister Evaline Widmer—Schlumpf told Swiss media yesterday that the country had no other choice but to sign the deal, pointing out that not doing so would be detrimental to Swiss financial institutions active on US capital markets.
The government stressed that regardless of whether it signed the deal or not, Swiss institutions would not be able to circumvent the US rules, but that with the agreement in place the implementation would be simplified.
Switzerland is one of seven countries which have so far agreed to comply with FATCA, which aims to ensure that all US citizens can be taxed by the Internal Revenue Service on their income and assets worldwide.