Switzerland's delivery of UBS client data to U.S. tax officials has been delayed after the Swiss lower house rejected the Swiss-U.S. deal to solve a tax row, triggering a new parliamentary debate.
Tuesday's last-minute rejection by the main arm of parliament contradicts a vote in favor of the deal by the upper house last week, meaning the two houses will have to try and work out an agreement over a common text before a final vote later this month.
Washington agreed on August 19 2009 to drop tax evasion charges against UBS after Berne promised it would transfer by end-August bank details of 4,450 U.S. clients of UBS, in breach of Swiss bank secrecy laws.
But a Swiss court in January blocked the data transfer, forcing the government to bypass the ruling with a legal patch that requires parliamentary approval by both houses and risks delaying the sharing of bank client information beyond the August deadline.
The lower house's vote against the deal is another headache for the government, which has struggled to win political support for the deal, seen in Switzerland as a capitulation to the U.S. to get the country's largest bank, UBS, off the hook.
What do you want to achieve with that (a rejection)? Wouldn't it be in the interest of our economy...when we could put an end to this painful story, Justice Minister Eveline Widmer-Schlumpf said in a final appeal in favor of the deal just ahead of the vote.
SVP AGAINST DEAL
Key to the vote against the deal was the decision by right-wing SVP party, Switzerland's largest, to reject it after an 11th-hour change of heart as it failed to win clear support for its campaign against new taxes on bankers' bonuses.
And even if the Swiss parliament were to fully support the text of the deal later this month, there is still an open question on whether the agreement will be put to a national referendum, a scenario the lower house supported on Tuesday.
A referendum would delay it by several months or even a year. The U.S. authorities could launch a fresh tax case against UBS if the Swiss fail to deliver the client data in time.
The Swiss government has repeatedly said that the agreement is the only way to end the prolonged UBS tax dispute, a distraction for Chief Executive Oswald Gruebel as he tries to rebuild the hard-pressed wealth manager, the world's second-biggest by assets.
The U.S. had accused UBS of helping rich Americans hide almost $20 billion of untaxed money in secret accounts. The tax probe came while the bank was already weakened by $50 billion of writedowns on toxic assets and put its survival at risk.
Shares in UBS were down 2 percent at 0821 GMT, extending earlier losses following parliament's vote and against a 0.55 percent fall in the Stoxx 600 European banking index <.SX7P>
(Writing by Lisa Jucca; Editing by Erica Billingham)