Swiss Upper House Backs U.S. Tax Deal to Protect Banks

{{ Switzerland cleared the first hurdle towards ending a long-running U.S. tax probe after one chamber of lawmakers voted to allow banks to sidestep strict secrecy laws to end the threat of criminal charges for helping wealthy Americans evade tax.}}

The draft law is set to face far tougher opposition in Switzerland’s lower house next week than in the upper chamber, which passed it by a decisive 24 votes to 15 on Wednesday.

The protection of client information has helped to make Switzerland the world’s biggest offshore financial center, with $2 trillion in assets.

But that haven has come under fire as other countries have sought to plug budget deficits by clamping down on tax evasion, with authorities probing Swiss banks in Germany and France as well as the United States.

With some of its biggest institutions facing formal investigations and Switzerland’s oldest private bank already a prominent victim in the probe, the Swiss government is seeking a swift compromise with the United States to limit the damage to its vital finance industry.

Even backers of the bill said they did so grudgingly, while others chafed at what they described as U.S. blackmail.

“Even if this bill violates our understanding of constitutional law, it is vital for our country. Switzerland’s reputation as a financial center is at stake,” said Ivo Bischofberger of the Christian People’s Party, who voted in favor.

U.S. investigators have lost patience with Swiss officials, who have struggled for months to find a way to bend secrecy rules to satisfy U.S. demands and clean up past transgressions.

The bill would allow banks to hand over information and strike settlement deals with U.S. prosecutors, which one lawmaker called a “choice between the plague and cholera.”

Such deals would avert the threat of criminal prosecution, but are still expected to include heavy fines that could cost the industry as much as $10 billion.

{reuters}