Swiss ask U.S. to drop UBS tax evasion case

Swiss President and Finance Minister Hans-Rudolf Merz gestures during a news conference after the weekly meeting of the Federal Council in Bern April 8, 2009.

WASHINGTON (Reuters) - Switzerland, under pressure to join a global crackdown on tax fraud, asked the United States Saturday to drop a legal case involving UBS bank in return for a new tax accord the two countries are about to negotiate.

UBS agreed recently to pay a $780 million fine and disclose the identity of about 300 of its U.S. clients to avert criminal charges but U.S. authorities are still pursuing it, seeking to access the data of another 52,000 Americans they say are hiding about $14.8 billion in assets in Swiss bank accounts.

Swiss President Hans-Rudolf Merz, whose country is famous for strict bank secrecy, told a news conference U.S. Treasury Secretary Timothy Geithner seemed sympathetic to his call, put to Geithner at a meeting in Washington.

The two sides start talks Tuesday on a new bilateral tax treaty and Merz said he hoped the negotiations would move swiftly.

Any such accord needed to be adopted by lawmakers in both countries, though, and perhaps put to referendum in Switzerland, where it could stumble if the U.S. tax evasion case was still hanging over UBS (UBSN.VX) (UBS.N), Merz said.

"I think Mr. Geithner is conscious of the fact that these criminal procedures that are taking place in the United States could be an obstacle to the political process of the double taxation accords," Merz said.

"This is why I proposed that the criminal proceedings be withdrawn at the time of signing of such an accord."

The U.S. authorities arrested and charged an accountant in Florida on April 2 in the first of what they said could be a series of tax evasion prosecutions of American clients of UBS.

Merz said this move, which came just as Switzerland had said it was ready to negotiate a new tax accord with Washington, had been "harmful to Switzerland and UBS."

Geithner, met on the sidelines of the International Monetary Fund's semi-annual meetings, said he would consider the Swiss request but could not reply immediately, Merz said.

The U.S. Treasury Department did not respond to a request for comment.

GERMAN DETENTE NOT EASY

Under international pressure, Switzerland announced earlier this month that it would move toward internationally accepted standards of bank information disclosure in tax fraud cases.

Merz, who is also his country's finance minister, said that renegotiation of tax accords with the United States, Japan and Poland were already earmarked as priorities.

Similar moves could start with European countries too.

Asked about Germany, which has been particularly critical of Switzerland, Merz said it was crucial to reach a solution with Berlin but suggested it would not be simple.

"When there have been psychological and political problems, it is not our fault," he said. "We have not polemicised in any way. But the German side, namely the finance minister, has been very heavily polemical."

He said the air had to be cleared first but German Finance Minister Peer Steinbrueck had not come to Washington for the IMF meetings.

"We will have to catch up when the opportunity comes up," he said. "I think we will now concentrate on countries with whom we could come to a quick solution."

Switzerland announced in March that it would start moving toward standards of bank information disclosure established by the Organization for Economic Co-operation and Development, something it has steadfastly refused to do before.

Like many other offshore financial centres and tax havens, it has come under intensifying pressure from governments keen to root out tax dodgers at a time when the global economic crisis is shrinking their revenues and forcing expenditure sky-high.

(Additional reporting by Gernot Heller; Editing by Andrea Ricci)