Schweizerische Interessen, NZZ-Inserat, Trumpf Buur, 26.3.88

Food for thought for an American journey (May 6, 2012)
Please send questions, bug reports and comments to: Anton Keller, +4127-2812477 - swissbit@solami.com

Pictet: not accused in breach of US law & not targeted by IRS, (D), (F), 5/6/12, www.solami.com/bankingblues.htm
"Free remain only those using their freedom", NZZ, Elisabeth Kopp, 3/5/12, .../iconoc.htm#Kopp
Copycat Arizona Indictment ignores QI bankers' obligations, .../irsarizona.pdf
Germans arrest mistaken Swiss banker for extradition to US, insideparadeplatz, 4/25/12 (.../bankingblues.htm#verhaftenI
"Play 'American hardball'", Der Bund, Faith Wittlesey, 2/1/12 (.../bankingfuture.htm#hardball)
Switzerland must defend its interests in the US more aggressively, NZZ, Richard Rahn, 3/18/12 (.../bankingfuture.htm#offensiver)
For Americans Abroad, Taxes Just Got More Complicated, NYT, David Jolly, 4/15/12 (...fatca.htm#abroad)
Allegations of foreign states and prosecutors, Thinking Things Over, Walter E. Haefliger, 3/8/12 (.../bankingfuture.htm#Nennwert)
Unfounded accusations against Bank Wegelin, Schweizerzeit, Hans Spitz, 3/4/12 (.../bankingfuture.htm#unfounded)
FATCA eulogy: Thank you, Mr. President, TA Magazine, Daniel Binswanger, 3/24/12 (.../fatca.htm#Binswanger)
No coffin nails for gravediggers! Iconoclast, 3/27/12 (.../fatca.htm#betrayal)
Road Map for a worthy global solution, 3/4/12 (.../frohofer.htm)
Tax dispute with the United States: The Search for Plan B, Tages-Anzeiger, Arthur Rutishauser, 4/10/12 (.../bankingblues.htm#B)
The U.S. prosecutors pull back the tax dispute, Tages-Anzeiger, Walter Niederberger et al. 3/28/12 (.../bankingblues.htm#95)
US Tax-Evasion Probe Said to Slow as Prosecutors transfer, Bloomberg, David Voreacos, 5/7/12 (.../bankingblues.htm#transfer)
Motion 12.3255 "No fiscal experiments without reciprocity", (.../parlament.htm#experiments),

The questions addressed to the IRS Commissioner Shulman on Jan 1, 2012 (www.solami.com/irsquery.htm) concern the QI agreement QIA between UBS and the IRS of 2001 which has been criticised on legal grounds. They also relate to the penal code excemption (article 271) which has made such misconduct possible in the first place and which a Swiss lawmaker castigated already in November 2000. According to the UBS report of the Federal Assembly's Control Commissions, the QIA and the 271 issue - as analysed in more details in its original German version - have been at the heart of the still unsettled US/Swiss banking and tax conflict. The QIA's well known and much decried hyper-complexity is probably not accidental. Indeed, even among tax experts it has largely escaped proper appreciation and debate that most criminal charges levied at Swiss QI banks and employees are unfounded. And it would thus not be surprising to see them soon recognised as such and either withdrawn from or thrown out by US courts - in as much as the actions and inactions thus invoked against them have not only been authorised but even called for by specific QIA provisions (.../kingpin.htm#obligations). Apparently, the IRS has kept these crucial details even from the US attorney who has led the - publicity-wise initially successful - charge against Switzerland's oldest bank, thus driving him onto thin ice ("A sad development in urgent need of reconsideration", Time Magazine, 2/13/12: .../iconoc.htm#sad). Similar deep-draught inside knowledge and a willingness to recognise and heed these facts is seen to be indispensable for getting out of this mutually harmful mess by way of a dignified global solution which will not add insult to injury. The questions thus raised with the IRS on behalf of concerned lawmakers here and there deserve special attention. In the interest of both sides, prompt and comprehensive answers by the IRS leadership may thus be pressed for from both sides of the Atlantic on the occasion of Swiss lawmakers' May visit to their colleagues on the Hill in Washington.

The data-transfer stop ordered by the Federal Administrative Court (BVG) of April 5, 2012 (A737/2012) provides relief only temporarily and for some 30 Credit Suisse clients. Last time, with its decision A7789/2009 of January 21, 2010, it also held such data releases to be incompatible with DBA 96. In that case it prevented the IRS to obtain "clean" account information on some 4450 UBS clients which it probably had already on stock, but could not use in court as they came from "unauthorised sources". Thereupon, and in order to accomodate the IRS' persistent data transfer request, the original Administrative Agreement of August 19, 2009 (.../UBSUKASEe.pdf) - negotiated on the strength of DBA 96 (article 25) but imposing conditions outside the frame of DBA 96 - was amended on March 31, 2010 and brought to a level of a separate treaty (.../UBSUKASE2e.pdf). On the US side, the IRS has so far failed to answer questions on whether authority was granted for such negotiations outside the strict limits of DBA 96 (.../irsquery.htm). This is not seen to be a marginal matter for those concerned with non-constitutional bureaucratic lawmaking. For said "separate" UBS treaty contains language at variance with our understanding of the law, for its article 7a stipulates (emphasis added):

"For purposes of processing the Treaty Request, this Agreement and its Annex shall prevail over the existing Tax Treaty, its Protocol and the Mutual Agreement in case of conflicting provisions."
In Swiss law at least, no administrative agreement can take precedence over a law or treaty formally adopted by Parliament - contrary affirmations notwithstanding. And it is our understanding of US law, that any clause or condition outside the DBA 96 could not deploy either any legal effect within the US jurisdiction. Unless, of course, the US constitutional lawmaker, i.e. the US Senate, formally overrode any such deficiency and explicitly consented to such DBA 96 changes and the US President signed off on these changes as well. Yet, to the best of our knowledge, no such amended treaty is known to have ever been or is even planned to be submitted to the Senate for ratification. Reflecting international public law 101, Switzerland's President declared on February 29, 2012 in Parliament. "We can apply a treaty only when it is in force, on both sides that is." Accordingly, the data on some 4450 UBS bank clients have been delivered under duress and illegally and as such cannot be used as evidence in US courts.

To be sure, the Federal Administrative Tribunal, in its decision A3013/2010 of July 15, 2010 authorised said data transfer - without prejudice to the data's legal status in the United States. For it did so on the mere basis of the Swiss Parliament's grudging ratification of said DBA 96-amending "treaty" on June 17, 2010, under the persistent pressure applied by US authorities, and without reservation of eventual US ratification.

This echoed similar judicial accomodations of external official bullying and disrespect for Swiss laws and customs. The first concerned the IRS' treaty-neglecting and arrogant administrative assistance request for bank client data without specifying the client's name, as the DBA 96 explicitly called for then - and still does now. Thus, in its decision  A7342/200 of March 5, 2009, it changed legal practice and, in an uncalled-for attempt at unconstitutional judicial lawmaking, went so far as to admit group requests. Even though a key characteristic of international relations and treaties - reciprocity - is all but in the cards for this ill-considered, ill-founded and anti-privacy novelty. The second instance - again without affecting the outcome of the Court's deliberations - is its persistently false assumptions on the nature and implications of the IRS' world-wide network of some 7000 qualified intermediary or QI banks it organised with its QI-system - with the blue-eyed help of UBS and Credit Suisse that is. The Court's understanding of the term "backup withholding tax" appears ill-advised and ill-founded. And it is particularly not a lawful tax - in as much as it never was approved by the US Congress. No less importantly, the unaccounted-for revenues thus raked in by the IRS' world-wide QI system are seen to be not only illegal protection money in return for anonymity (sic!), but they are understood to be subject to no democratic control whatsoever (.../kingpin.htm#penalty). The carefully camouflaged volume of these funds are understood to pale the hundreds of million dollars of tax losses the IRS routinely invokes as justification for its world-wide campaign for hassling American taxpayers abroad (.../fatca.htm#abroad). With the latter thus seen as a cleverly devised mere smoke-screen for bigger fry. One estimate repeatedly debated at the authoritative International Cambridge Symposium on Economic Crime - and never challenged even by participating IRS representatives - places the annual revenue stream.from the QI system's "backup withholding tax" in the range of several hundred billion dollars (.../vision.htm#500). Thus the additional importance of getting the IRS to promptly and comprehensively answer the questions submitted to its Commissioner on January 2, 2012 (.../irsquery.htm)

Pre-occupying the moral high ground as a smokescreen for less admittable agendas is a time-tested stratagem which works particularly well in complex matters like taxation and an environment of information saturation. Nevertheless, a non-partisan deep-draught look at the evidence - even from abroad - is usually appreciated by seasoned politicians like Senator John Kerry who was educated in Switzerland and knows that the earth ain't flat. For them, too there is a significant difference between mere tax avoidance and enforcing constitutionally approved tax rules on the one hand, and trampling on fundamental principles like sovereignty, market freedom and privacy. The former is a hall mark, even a key pillar of the market system, as pointed out in the decade-old fight against soft laws and anti-democratic bureaucratic lawmaking by national and international organisations like the OECD and its ill-considered Orwellian INTERFIPOL scheme as well as its cancerous outgrowth FATF (.../OECD.htm#plot ¦ .../oecdmandate.htm ¦ .../fatf.htm).

A particularly galling, insidious and harmful example is the IRS' sneeky attempt to cloud and circumvent the necessary fundamental difference between administrative assistance - e.g. in tax matters - and legal assistance in criminal matters where, as a key achievement of civilization, the burden of proof in particular rests on the state. This becomes strikingly clear in the case of the DBA 96 Additional Protocol of 2009 (.../DBAUSeprot.pdf) whose passage in the US Senate has been blocked by a single freshman member. This has been to the dismay of the IRS and of all those who wish to quickly resolve the current impasse in Swiss/US relations but have not - yet - discovered the protocol's true significance and mutual harmfulness.

Not only the clear DBA 96 text, but even the IRS' own technical explanations define this treaty's purpose unmistakably as follows:

"The information to be exchanged is that which is necessary for carrying out the provisions of the Convention or for the prevention of tax fraud or the like in relation to the taxes covered by the Convention." (.../DBAUStech.pdf - p.91, emphasis added)
From this it follows that that the treaty's scope is limited to its proper application and the prevention of tax crimes, ie to exchanges related to the realm preceding the commission of crime, to the exclusion of its establishment or even prosecution. This view is supported also by the provisions of the Swiss/American Legal Assistance Treaty of 1973 which - with proper, enhanced and strict safeguards for the accused - provides for legal assistance between juridical authorities for the examination and exchange of evidence in cases of treaty-covered crimes for the clear purpose of their eventual prosecution. Importantly, article 2 1c5 specifies:
"This treaty shall not apply to ... investigations or proceedings ... concerning violations with respect to taxes, customs duties, ..."
The Protocol now before the Senate is not accompanied by other amendments to any other Swiss/US treaty. Yet, it seeks and, if enacted, would provide for an ill-explained and ill-considered fundamental DBA 96 change in that its purposes would hence be:
"The competent authorities of the Contracting States shall exchange such information as may be relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention." (article 25 §1 - emphasis added)
Such a disguised sea-change in international relations seems to deserve more profound examination - the more so as it is seen to gravely undermine essential principles, including legal reliability. Such examinations could also be expected to throw urgently needed light on the IRS's QI dark spots (.../QI.htm ¦ .../irsquery.htm), and put into the right perspective what - in the form of its FATCA plans (.../fatca.htm) - it is about to impose on an ill-prepared and unwilling world at great goodwill and other costs not least on the US citizens and their economy.

Sine ira et studio
On and for this mutually more beneficial and respectful path back to traditionally friendly relations between our Sister-Republics, support from all concerned on both sides of the Atlantic is urgently called for. In the event, the DBA 96 provides for a recourse to arbitration for settling some mutually harmful misunderstandings which have been allowed already far too long to burden our long-standing excellent relations. At any rate, all facts considered in their proper context, it should not be beyond the capacity of women and men of goodwill to promptly work out - on the appropriate level and in line with the spirit and text of the existing treaties - a mutually satisfactory and lasting political global solution, as proposed in the Swiss Parliament (.../parlament.htm#experiments). Without further extortion payments and involontary concessions and submissions, while standing tall, knowing where we come from and determined to pursue our individual and joint responsibilities.

(original German Text plus DBA extracts: www.solami.com/DBA96.htm)
 

Neue Zürcher Zeitung  13 April 2012    re:  On salami tactics and prime beef
Anton Keller (13th April 2012, 19:40) With a single voice into a more dignified future
    On May 6, a squad of Swiss parliamentarians will fly to their colleagues in Washington. If certain bankers and their allies in the Swiss establishment had their way, it would be more of the same as pleases our recklessly marauding and arm-twisting tormentors at the IRS and the Justice Department, i.e. more sellouts and betrayals on our sovereignty, public order and other key national interests. Never mind shooting into the back of our real friends, like the valiant Senator Rand Paul. Yet, there is still time to change course and to develop a mutually helpful position and to speak with one recognisable and clear voice. In order to assist our friends on the Hill and elsewhere in the prompt and lasting resolution of the misunderstandings which have bedeviled our bilateral relations recently. Without further extortion payments, involuntary concessions and undignified submissions. And in the spirit and respecting the text of the many treaties our two Sister Republics have put at the service of our citizens, interests and common good  (www.solami.com/DBA96.htm | /frohofer.htm).

Neue Zürcher Zeitung  13 April 2012re:  "We have not let ourselves be blackmailed"
Anton Keller (13th April 2012, 02:09)    IMF meeting:  pro memoria
    The Swiss/American Double Taxation Agreement of 1996 (DBA 96) was signed by the US Treasury Secretary. It defines him "or his representative" as the "competent authority" also for negotiations (www.solami.com/DBA96.htm). Of course, neither the current office holder, nor his colleague at the Justice Department may yet find it opportune to keep their free-wheeling subordinates from neglecting deep-draught bonds of friendship and valid treaties (.../USCH.htm). Whether knowingly or unknowingly, they are thus seen to continuously tolerate that some of their subordinates have negotiated clearly outside of their mandate, even run roughshod on US and other countries' legitimate interests by seeking to enforce ill-approved rules abroad. In either case, it seems to befit their cabinet colleague whose brief is the constitutional conduct of US foreign relations, to carefully examine the consequences of such mutually harmful actions and inactions on the continued availability and usefulness of Switzerland's current and possibly enhanced good offices in the Middle East in particular (.../inventory.htm). In the event, the DBA 96 contains an arbitration clause for resolving particular problems. And for problems outside of the DBA-frame, too the State Department is understood to be constitutionally in charge.
    Administrative assistance under the DBA 96 is strictly limited to its implementation, and to "the prevention of fraud and the like", ie to the realm preceding an offense, to the exclusion of the establishment and eventual prosecution of any offense. The latter are covered by the Mutual Legal Assistance Treaty of 1973 (.../USCHlegal.pdf), which continues to explicitly excludes tax offenses. The valiant US Senator Rand Paul, commendably, has stead-fastly blocked passage of the DBA 96 Additional Protocol of 2009 which unduly, unnecessarily and harmfully abrogates the strict separation of administrative and legal assistance without an eventually necessary adjustment of the Swiss/US Treaty of 1973. This protocol is ill-considered and ill-negotiated as it would also undermine essential interests on both sides and would cause legal unreliability and uncertainty, with the IRS eventually being its sole "beneficiary". As such its ratification in the present form is understood not to be in the national interest of either party.
    Most charges brought against Swiss QI banks and bank employees are seen to be without foundation in as much as they are covered by the IRS' Qualified Intermediary Agreement (.../kingpin.htm#obligations ¦ /frohofer.htm ¦ .../QI.htm ¦ .../MCR.htm).

Tages-Anzeiger  12 April 2012    re: The new treaty will not solve all problems according to experts
Anton Keller (April 12, 2012 21:44)    Kudos for U.S. Senator Rand Paul  (censored)
    The spokesman of the Federal Finance Department stays on track. For him, the US ratification of the IRS-imposed DBA 96 Additional Protocol would be in line with US interests, and it could even have prevented the data-transfer stop unconveniently and embarrassingly ordered by the Federal Administrative Court. No word then on Swiss interests - as if that were none of his concerns and not his job. We ought to support - instead of disavowing - US Senator Rand Paul, so far the most effective protectors of our national interests on the Hill (www.solami.com/DBA96.htm).
 

Dear Member of the US Congress,

Even if you are not a member of the Swiss Caucus on the Hill, or won't be interested in meeting Swiss lawmakers who come to Washington May 6-9, the issues to be discussed there are likely to stay with all of us for a while. The impending publication of the Federal Council's report on the below-reproduced postulate 2 is expected to provide new light on some underlying problems - including the IRS' mutually damaging QI and FATCA dark spots. As well as opportunities for lawmakers here and there to bring our traditionally friendly and mutually respectful and beneficial relations back on keel. At any rate - and as detailed in the eye-opening expert opinion particularly on the ill-considered mixture and deliberate confusion of administrative assistance in tax matters with legal assistance in criminal matters (www.solami.com/hill.htm) - the Swiss Government's answers will likely give further cause for serious reflections.

      "Postulate 2: The Federal Council is requested to comprehensively clarify in a detailed report the questions raised in the Control Committees' report with regard to the application of penal code article 271, and with regard to the compatibility of the Qualified Intermediary Agreement with the Swiss banking secrecy." (by the Federal Assembly's Control Commiitees' investigation into the UBS case (p.3422; 10.3390/10.3629)
Parallel to the Swiss lawmakers' Washington visit, I intend to be also available for discussions with interested staffers from May 4 to 10. For appointments, I may either be contacted at the Cato Institute's Advancing Liberty Biennial Dinner at the Washington Hilton on May 4 (reception 6.30pm) or, preferably, your staffer may email or telephone me before (swissbit@solami.com - 0114179-6047707).

Yours sincerely,

Anton Keller, Swiss lawmaker sherpa
0114127-2812477