WASHINGTON (Reuters) - The sanctity of the secret Swiss bank account — an icon of global finance — is under growing pressure in a tax investigation due to come into public view on Wednesday at a U.S. congressional hearing.
Senator Carl Levin, a long-time foe of offshore tax havens estimated to deprive the U.S. government of $100 billion in annual revenues, will convene the hearing before the Senate Permanent Subcommittee on Investigations that he chairs.
Levin will grill Mark Branson, a top officer at UBS AG, over a tax case in which the U.S. government wants the giant Swiss bank to disclose the names of thousands of rich U.S. clients suspected of dodging U.S. taxes.
The Michigan lawmaker told reporters in a briefing on Tuesday that the hearing will also focus on a U.S.-Swiss tax treaty he described as having “very, very limited value.” He said, “You can’t rely on the Swiss. That’s the bottom line.”
Branson will appear before the Senate panel for the first time since UBS last month acknowledged responsibility for helping U.S. clients conceal assets from the U.S. government, which is cracking down on tax dodgers with offshore accounts.
UBS, the world’s largest banker to the rich, also agreed last month to pay a $780 million fine, and to identify some U.S. clients, in a legal agreement that resolved criminal fraud charges that it helped wealthy Americans evade taxes.
U.S. authorities, fearing that the agreement might yield very few names, have since filed a lawsuit against UBS seeking information on as many as 52,000 undeclared accounts.
UBS has said it will fight the lawsuit, arguing that the information sought by the United States is protected by Swiss financial privacy laws. Branson is chief financial officer of UBS Global Wealth Management and Swiss Bank.
Also testifying will be top officials of the U.S. Internal Revenue Service and the Justice Department’s tax division.
Nearly a third of wealth kept abroad globally is in Swiss banks — an amount estimated at $2.2 trillion, making the Alpine state the world’s biggest offshore center.
Levin’s subcommittee has been probing offshore tax havens for years, taking aim sometimes at tax havens other than Switzerland, including Liechtenstein and the Cayman Islands.
Branson last testified before Levin in July. In that dramatic session, Branson apologized for UBS’ activities and said it would cease offering cross-border private banking through its unregulated units to U.S.-domiciled customers.
Levin and Democratic colleagues this week introduced legislation into Congress to crack down on tax havens.
The Obama administration on Tuesday endorsed the bills filed in both the Senate and the House of Representatives.
The administration’s support greatly improves the chances of offshore tax legislation becoming law this year, Levin said.
He asked Treasury Secretary Timothy Geithner to join other nations “calling for action to be taken at the G20 meeting in April to clamp down on offshore secrecy jurisdictions that impede tax enforcement.” The global economic crisis is expected to dominate the meeting of the Group of 20 major developed and emerging economies.
The bills introduced by Levin and Texas Rep. Lloyd Doggett would ban patenting of tax avoidance plans; close offshore tax loopholes, including one that lets shell corporations escape U.S. taxes; target dozens of “secrecy jurisdictions” for greater scrutiny; and put a greater burden on U.S. taxpayers to show that their tax arrangements are legitimate.
When he was a senator last year, President Barack Obama co-sponsored similar legislation with Levin.
Reporting by Kevin Drawbaugh; Editing by Valerie Lee