U.S.-Swiss Tax Treaty Amendments: Stricter Cooperation and Enforcement on the Horizon

Jun 22, 2009   

The U.S. Department of the Treasury issued a press release on June 19, 2009 to mark the successful conclusion of treaty negotiations on a plan to share tax information between the United States and Switzerland. 

From the American perspective, the treaty revisions embody an Obama Administration policy goal:  to edge closer to full enforcement of the tax-code by eliminating havens for tax evasion.  From a global perspective, the treaty revisions mark a broader campaign to meet the requirements of Article 26 of the Organization for Economic Co-operation and Development’s (OECD) Model Tax Convention on Income and Capital.  IRS Commissioner Douglas Shulman indicated participation in this global shift only a month ago at the Forum on Tax Administration, warning those “who hide assets overseas [to] expect an increasing number of revenue bodies to cooperate and share information.”

OECD summarizes Article 26 as a tool for eliminating bank secrecy in the face of warranted searches for financial information outside of signatory nations’ borders.  Several countries that historically manage large amounts of foreign capital have indicated a transition to adherence to Article 26.  Some of these jurisdictions include Hong Kong, Singapore, Austria, and Liechtenstein.  OECD’s Secretary General called these developments “a fundamental change and an important moment in the history of international tax cooperation” and characterized tax enforcement as a critical part of recovery from the global economic crisis.

Negotiations took place over about two months to revise the current treaty on tax information sharing between the two countries.  The Treasury Department expects official signing of the treaty within months.  So far in 2009, the U.S. has come to agreement on similar revisions with France and Luxembourg.

For the complete text of the IRS press release on the U.S.-Swiss tax treaty amendments, please click here.

Our professionals at FHI will be tracking this issue as it develops and the Obama Administration – in Treasury Secretary Tim Geithner’s words – carries out its “commit[ment] to reducing off shore tax evasion to help ensure that all U.S. taxpayers are playing by the same rules.”

For assistance with navigating the changing waters of international taxation and enforcement, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com.