SWISS LINK TAX AGREEMENT RENEGOTIATIONS WITH UBS \

2009-04-09 14:33:00 09BERN169 Embassy Bern CONFIDENTIAL 09BERN122 VZCZCXYZ0002\
RR RUEHWEB\
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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 \
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SIPDIS \
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TREASURY FOR L.NORTON, L FOR K.PROPP AND T.WYNNE \
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E.O. 12958: DECL: 04/08/2019 \
TAGS: EFIN ECON SZ
SUBJECT: SWISS LINK TAX AGREEMENT RENEGOTIATIONS WITH UBS \
CASE \
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REF: BERN 122 \
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Classified By: POL/E Counselor R.Rorvig for reasons 1.4(b) and (d) \
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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. \
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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. \
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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. \
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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 \