U.S. may drop UBS tax evasion case: report

By Jason Rhodes and Emma Thomasson
ZURICH (Reuters) - The U.S. Justice Department may drop a legal case aimed at forcing Swiss bank UBS AG to reveal the names of 52,000 wealthy American clients suspected of offshore tax evasion, the New York Times reported on Tuesday.
Swiss Finance Minister Hans-Rudolf Merz said at the weekend that U.S. authorities could be willing to strike a deal after Switzerland agreed a new double taxation treaty with the United States last week aimed at fighting tax evasion.
The case could be dropped before July 13, when Judge Alan Gold of the United States District Court in Miami, is expected to hold a short trial on the issue, the New York Times said, citing a United States official briefed on the matter, adding that a deal could still collapse.
"We hope it's true but we also have to look at what conditions are attached," a Swiss finance ministry spokesman said, adding it wanted to see official confirmation.
UBS, the world's largest wealth manager which has seen big client outflows over the U.S. case, declined to comment on the report, while the U.S. Justice Department could not be immediately reached for comment.
"After both governments agreed on a new double taxation treaty last week it now seems as if a compromise could also be found for this case. This would be highly positive news for UBS," said Kepler Capital Markets analyst Dirk Becker.
However, he added that most of the damage had already been done to UBS's reputation.
Swiss Economics Minister Doris Leuthard was quoted on Tuesday as saying it will take some time before UBS -- one of Europe's banks hit hardest by the financial crisis -- is back to health, but its situation has improved under new Chief Executive Oswald Gruebel.
UBS shares were up 3 percent at 14.20 Swiss francs by 0745 GMT (3:45 a.m. EDT), outperforming a 0.1 percent lower DJ Stoxx European banking sector.
BERLIN SUMMIT
The Swiss agreement last week of a new tax treaty with the United States comes ahead of a summit in Berlin on Tuesday where ministers are expected to renew pressure on nations like Switzerland to weaken bank secrecy and increase tax cooperation.
Deutsche Bank analyst Matt Spick said the U.S. tax agreement increased the chances of a deal but said the U.S. Internal Revenue Service was unlikely to settle early to keep pressure on UBS clients to declare themselves voluntarily.
"This means that a settlement is likely to take place close to the July 13 court hearing date. Furthermore, an unfavorable ruling is still possible, which presents a key risk to the UBS franchise and share price," he wrote in a client note on Monday.
The Swiss government has warned it could have trouble getting new tax agreements ratified in possible referendums without the U.S. giving ground on the UBS case.
"UBS also has to make its contribution and the USA will move," Merz told Swiss Sunday paper SonntagsZeitung. Continued...
Source: Reuters