Swiss Bank Pulls The Plug On FATCA

Barclays Bank in Switzerland is one of the first banks to drop out of the new US Foreign Account Tax Compliance Act (FATCA) laws. 

The bank has announced pulling out of FATCA after taking legal advice. 

FATCA is run by the US Internal Revenue Service (IRS) and requires foreign banks to report the financial details of US taxpayers controlling accounts and investments overseas. 

Bank executive Francesco Grosoli explained the bank was declining to co-operate with the IRS. 

The IRS has made no response to the move. 

However, FATCA regulations say that banks within the network must deduct 30% withholding payments on any financial transactions with defaulting banks.

Merciless pursuit

The IRS can also impose fines and bar offending financial institutions from trading on the US dollar markets. 

The IRS stance is an assumption foreign banks are helping US customers evade tax – followed by a threat that ‘appropriate action’ will follow. 

The US authorities have already mercilessly pursued Swiss banks for helping US customers evade tax. 

UBS and Credit Suisse have paid fines of more than $3 billion, while investigations into the tax advice given by up to 100 other Swiss banks are ongoing. 

Grosoli did not give any explanation for the bank’s decision to leave FATCA. 

The FATCA tax network has been joined by 101 countries swapping tax and financial information with the IRS, with more than 100,000 financial institutions worldwide also agreeing to disclose customer activities.

Whistle-blower sells secrets

Financial institutions have to report details of US based taxpayers with accounts or investments of more than $50,000 and US expats with balances of $200,000 or more. 

Meanwhile, tax authorities in Germany have reportedly done a deal with a whistle-blower to buy the Swiss bank account details of 25,000 taxpayers. 

Scant information has been released about the move, but German media have speculated the information relates to Credit Suisse accounts. 

German tax authorities have bought several lists of Swiss secret bank accounts in recent years, resulting in around 19,000 taxpayers volunteering the details of hitherto unknown cash and investments. 

Also, the Swiss National Bank, the country’s central bank, has announced a negative interest rate of -0.25% on sight deposits. 

Sight deposits are money held on account with the national bank by other Swiss banks. 

The move was taken to ease pressure on the Swiss Franc the plunging Russian rouble.

The aim is to try to maintain the Swiss Franc exchange rate against the US dollar and Euro.