Looks Like a Fad – IRS v. UBS II

Today it was announced by the Swiss government and the IRS that the deal regarding the information about accounts of supposed U.S. tax-evaders had been signed.

From the IRS press release:

R-2009-75, Aug. 19, 2009WASHINGTON — The Internal Revenue Service and the Department of Justice today announced the successful negotiation of an agreement that will result in the IRS receiving an unprecedented amount of information on United States holders of accounts at the Swiss bank UBS.As a result of this agreement, the IRS will receive substantially all of the accounts that it was interested in when it initiated the John Doe summons against UBS.

That sounds like a sucess, doesn’t it. But wait, here is the Swiss governement’s take on it from Neue Zürcher Zeitung (NZZ) (translation mine):

According to the Swiss Minsister of Justice, Evelyne Widmer-Schlumpf, the IRS will as a next step file a new request for legal assistance with the Swiss government  for the release of 4450 customer files. The Swiss government had agreed to put in some additional effort to provide the assistance and bring the matter to a close within a year. The right of the clients to judicial review remains in place.

Now, the Swiss government expects in reality 4450 requests for legal assistance, one for each customer. It is according to Widmer-Schlumpf a very ambitious goal for the Swiss government to handle that many requests within a year and the government might well fail to meet the deadline.
[Note: It seems the Swiss government will hire external resources from PwC – why, oh why PwC? They already audit the SNB].
In addition, the Swiss Federal Administrative Court which will handle any legal challenges should a customer decide to challenge the government’s decision to release his files might block the release of any data, according to the Justice Minister. [Hhm, well. Knowing the Swiss courts as part of the executive and tightly linked to it, I expect no major roadblock there].

There is considerable room for friction here. Especially since the IRS seems to expect up to 10,000 customer files. To me this looks like an anti-climactical event that doesn’t justify all the fuss that has been made. In fact, they are back to square one and I wouldn’t be surprised if any new obstacles would pop up.

The agreement itself (see below) may also be open to legal challenges by any agrieved party with legal standing (30 days, starting tomorrow).

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