Swiss lawmakers set to vote on tax proposal with US

Swiss lawmakers are set to back a tax proposal with the United States on Wednesday in a move which could pave the way for Switzerland to settle a US probe into Swiss banks and hidden offshore accounts.

The lower house will vote on a proposal clarifying how Switzerland would hand over data on Americans suspected of dodging taxes at home.

The proposal, which passed the upper house in December, seeks to backstop an expected deal over U.S. probes into 11 banks including Credit Suisse and Julius Baer, likely to comprise a data handover and fine payment.

Legal loopholes threatened to upend UBS's deal with U.S. authorities in 2009 and Swiss officials are eager to avoid another lengthy court fight by clients seeking to protect their identity.

Specifically, the plan would allow Switzerland to hand over data on suspected tax evaders, even if U.S. tax authorities cannot identify alleged offenders by name or bank account.

The move represents a weakening of Switzerland's long-cherished secrecy laws, which have underpinned the country's finance industry, on which the economy relies heavily.

There is little doubt the plan will pass after the Social Democrat (SP) party came out in favor and pledged to support the
proposal if the government stays the course on planned clean-money measures.

Provided the plan does pass parliament and 100 days pass without a call for referendum, attention will shift to talks between the U.S. and Switzerland for a deal meant to sweep Swiss bank accounts clean of offenders and make good on past transgressions.

According to a source familiar with the matter, Swiss and U.S. talks are continuing, but sticking points remain in details
such as how much client data from the 11 banks Switzerland will guarantee to hand over.

Though Switzerland has a rough idea how many potential tax evaders can be identified, the final number is a matter of speculation.

The Swiss banks have already sifted through client data for potential dodgers, through identifying characteristics such as
clients who use a post-office address for their bank correspondence.

While U.S. negotiators are pushing for a guarantee on a large number of client data to be handed over, Swiss officials are reluctant to give in, according to the source. The reasons involve the intricate nature of Swiss banking secrecy.

Those deemed tax offenders still have a 30-day right to appeal and if they can prove their funds held in Switzerland are
declared and taxed in the United States, Switzerland cannot hand over the data.

Another difficulty is that divisions between Swiss justice and finance arms have emerged over how to deal with U.S.
negotiators, the source said.

The Swiss government was not immediately available to comment on the negotiations. Charles Miller, a Justice
Department spokesman, and Dean Patterson, an Internal Revenue Service spokesman, both declined to comment.

The talks came into sharper focus after U.S. prosecutors indicted Swiss private bank Wegelin in February, shortly after
the bank broke itself up in the face of the U.S. campaign.

The government talks are largely separate from individual discussions conducted between U.S. officials and banks including Credit Suisse, which has put aside money towards paying a fine to the U.S. over offshore accounts, and Julius Baer. U.S. officials are using information won after a landmark settlement with UBS in 2009.

The talks also coincide with the latest of several amnesty programs offered by the IRS, which is attempting to shake out tax offenders by making it easier for them to come clean.