SWISS LINK TAX AGREEMENT RENEGOTIATIONS WITH UBS \

2009-04-09 14:33:00 09BERN169 Embassy Bern CONFIDENTIAL 09BERN122 VZCZCXYZ0002\ RR RUEHWEB\ \ DE RUEHSW #0169 0991433\ ZNY CCCCC ZZH\ R 091433Z APR 09\ FM AMEMBASSY BERN\ TO RUEHC/SECSTATE WASHDC 5814\ INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC\ C O N F I D E N T I A L BERN 000169 \ \ SIPDIS \ \ TREASURY FOR L.NORTON, L FOR K.PROPP AND T.WYNNE \ \ E.O. 12958: DECL: 04/08/2019 \ TAGS: EFIN ECON SZ SUBJECT: SWISS LINK TAX AGREEMENT RENEGOTIATIONS WITH UBS \ CASE \ \ REF: BERN 122 \ \ Classified By: POL/E Counselor R.Rorvig for reasons 1.4(b) and (d) \ \ ¶1. (SBU) The Swiss Federal Counsel announced on April 8 that \ the first renegotiated double taxation agreement to include \ the new OECD Article 26 provisions on administrative \ assistance will be subject to an optional public referendum. \ Subsequent agreements will not be submitted to the referendum \ procedure unless they contain significant new obligations or \ departures from the first agreement. Econoffs met with Swiss \ Department of Foreign Affairs Head of Sectoral Policy \ Coordination Manuel Sager on April 9 to discuss Switzerland's \ intentions in regards to the sequence for negotiating \ agreements. \ \ ¶2. (C) Switzerland prioritized Japan, Poland and the U.S. \ for the first three negotiations. The Japanese agreement is \ the farthest along, since it involves incorporating OECD \ standards into a Swiss-Japanese double taxation treaty, which \ is in the late stages of negotiation. However, the Swiss are \ negotiating with the Japanese Finance Ministry, and the \ agreement is also subject to a full review by the Japanese \ Foreign Ministry, which could delay final approval. \ Negotiations with Poland began in March. and the U.S. \ negotiations will begin April 28. Sager said that the \ Government of Switzerland does not have a tactical preference \ as to which agreement is completed first, but it recognizes \ that Japan and Poland will have an easier ride in the Swiss \ Parliament. As reported reftel, post is concerned that the \ U.S. agreement could also have difficulties with a referendum \ given current negative public sentiment caused by the UBS \ case. \ \ ¶3. (C) Sager stressed that Switzerland sees linkage between \ the negotiations of the tax agreement and the ongoing UBS \ case. He commented that while a factual or legal connection \ may not exist, Switzerland definitely views the two as \ politically linked. In Sager's view, it would be very \ difficult to get an agreement through the parliament (not to \ mention an expected referendum challenge),if there is no \ progress on the separate UBS case. Sager admitted he could \ not propose a formal solution, but that the parties needed to \ come up with some ideas. For example, he said if a \ significant number of UBS clients took advantage of the IRS \ voluntary declaration program, then perhaps the case would \ resolve itself. \ \ ¶4. (C) In regards to the UBS case, Sager confirmed that \ Switzerland will file an Amicus Curiae brief with the court. \ Sager stated that the brief will be based on the grounds of \ Swiss sovereignty, the double taxation agreement, which is, \ in the Swiss view, the only means to obtain information in \ these type of cases, and under current Swiss banking laws. \ CARTER \