SWITZERLAND STARTS TO COME CLEAN / THE NEW YORK TIMES EDITORIAL ( RECOMMENDED READING )

June 27, 2010

Switzerland Starts to Come Clean

The United States Treasury forgoes about $100 billion a year in uncollected taxes from businesses and wealthy individuals that keep their money in offshore accounts, out of reach of the Internal Revenue Service. This is not only notoriously unfair; it is a crime. It has also proved notoriously difficult to stop because of the bank secrecy statutes in tax havens around the world.

The Swiss Parliament’s approval of a deal to give the I.R.S. the names on 4,450 American accounts at the Swiss bank UBS is an important victory. And with international tolerance for this grubby business running out, other tax havens are taking a hard look at their policies.

Switzerland, Singapore, Luxembourg and others have begun entering into bilateral tax treaties under standards codified by the Organization for Economic Cooperation and Development. Those rules commit them to provide information requested by their treaty partners to enforce tax laws, regardless of any bank secrecy laws on their books. The United States has signed several new treaties, including one with Switzerland.

The I.R.S.’s campaign in the UBS case has already yielded a trove of information and important new policies. Last year, 15,000 Americans took advantage of a temporary amnesty and came clean about their offshore accounts. In March, Congress passed the Foreign Account Tax Compliance Act.

Starting in 2013, foreign financial institutions will be required to disclose to United States authorities information about American account holders, and companies in which Americans have at least a 10 percent interest. If they refuse, the I.R.S. can impose a 30 percent withholding tax on their income from United States’ securities.

Still, the difficulty in getting Switzerland to provide the names on 4,450 accounts at UBS suggests that this struggle is far from over. I.R.S. investigators expect that information will open up leads about tax evaders and the financial advisers and institutions that abet them. We will know how useful the new treaties to combat tax evasion really are by how quickly and comprehensively Switzerland and others respond to the I.R.S.’s requests.