* Deal protects Swiss banks from 2014 penalties
* More than 50 countries seeking deals with U.S.
By Patrick Temple-West
WASHINGTON, Feb 14 Advancing a U.S. crackdown on
tax evasion by Americans, the U.S. Treasury Department said on
Thursday that Switzerland and the United States have signed a
pact to make Swiss banks disclose information about U.S.
The agreement is the latest in a series between the United
States and other countries designed to carry out the Foreign
Account Tax Compliance Act, or FATCA, enacted in 2010.
The Swiss deal is the first of its kind and differs in key
ways from previous pacts. It requires Swiss banks to sign up
directly with the U.S. Internal Revenue Service, while giving
the banks a way to avoid violating Swiss financial secrecy laws.
FATCA requires foreign financial institutions to tell the
U.S. Internal Revenue Service about Americans' offshore accounts
worth more than $50,000. FATCA was enacted after a Swiss banking
scandal showed U.S. taxpayers hid millions of dollars overseas.
The pact announced on Thursday, known as an
intergovernmental agreement (IGA), needs to be ratified by the
Swiss parliament. It does not need approval by the U.S. Senate.
The deal has been close to completion since December.
FATCA imposes steep penalties beginning in 2014 on financial
institutions that do not comply with the law. Banks and other
financial institutions failing to comply could be frozen out of
U.S. financial markets.
"We are pleased that Switzerland has signed a bilateral
agreement with us, and we look forward to quickly concluding
agreements based on this model with other jurisdictions," Acting
Secretary of the Treasury Neal Wolin said in a statement.
The Swiss Bankers Association said it welcomed the FATCA
deal but remains critical of the compliance and administrative
burdens of the U.S. law.
'MODEL TWO' DEAL
In signing the pact, Switzerland joins Britain, Denmark,
Ireland and Mexico as countries that have finished FATCA IGAs
with the United States.
The Treasury has pursued two different IGA models. The Swiss
deal is the first 'model two' agreement signed. It will require
Swiss financial institutions to provide U.S. account holder
information directly to the IRS.
The four other IGAs concluded so far are 'model one'
agreements, which allow financial institutions to comply with
FATCA by channeling U.S. account-holder information through
their national tax authorities to the IRS.
The Swiss deal does not require Swiss banks to automatically
give the IRS account-holder information if the U.S. client
refuses to cooperate. But the IRS can still get that information
via Swiss government authorities.
"At the end of the day, the IRS gets the information it
wants, it's just going to take a little bit longer," said Laurie
Hatten-Boyd, a principal with Big Four accounting firm KPMG LLP.
Luxembourg and Austria are also considering 'model two'
deals, she said.
Also, the Swiss deal is not reciprocal, meaning the IRS will
not provide Switzerland with information about Swiss citizens'
accounts in U.S. banks.
Some IGAs have limited reciprocity. The Obama administration
is considering asking Congress for the power to require U.S.
banks to provide more information about foreigners' accounts to
the clients' home governments.
The Swiss pact excludes Swiss social security, pension funds
and some insurers from FATCA.
Japan is also working on a "model two" FATCA agreement, and
Italy is in the final stages of a FATCA deal, according to the
The Treasury is working with more than 50 countries to
complete deals, but negotiations have not progressed with key
U.S. trading partners Canada and China.
South Africa's National Treasury said earlier this month it
had started negotiating with the Treasury for a FATCA deal and
was aiming for a reciprocal pact.
Final rules for FATCA compliance were published in January.
Financial firms must register by Oct. 25, 2013, to avoid next