ZURICH (Reuters) - UBS UBSN.VX denied it is helping wealthy Germans dodge taxes by telling them to move funds to Singapore and other money centres ahead of a Swiss tax deal due to come into force in January.
“We do not help clients to evade taxes and we clearly don’t support clients in circumventing bilateral tax agreements, including the one with Germany,” UBS private bank boss Juerg Zeltner told Reuters in an interview on Tuesday.
He was responding to a media report last week which said UBS, Europe’s fifth-largest bank by market value, had advised German clients to move funds to Singapore to avoid detection by authorities ahead of the planned withholding tax.
Privacy is crucial to Switzerland’s $2 trillion offshore wealth management industry and the country has also clinched withholding tax deals with Great Britain and Austria as an alternative to an automatic exchange of information about banks’ clients.
Zeltner outlined measures the Swiss bank has implemented to prevent tax evasion following a lengthy U.S. civil and criminal battle where it eventually pleaded guilty in 2009 to aiding wealthy Americans dodge taxes using hidden Swiss accounts.
He said the Swiss bank took initial action as early as autumn 2010 to ensure that the bank doesn’t help clients circumvent tax rules.
Other measure include stiffening guidelines for its private bankers on acquiring European clients while withholding tax deals with Britain and Germany were being hammered out and reminding bankers they “are on their own” legally if they do not adhere to UBS rules, Zeltner said.
His comments are an attempt to defuse tensions stoked after fiery words from Germany’s centre-left opposition leader Sigmar Gabriel on Sunday, comparing Swiss banks to organized crime syndicates in how they are accused of helping Germans avoid tax authorities.
Zeltner said the number of German UBS clients that have money in Singapore had declined since 2009, both in absolute numbers as well as overall funds managed.
“Singapore does not represent a loophole,” Zeltner said.
Last week, North-Rhine Westphalia said it had bought new bank data on alleged German tax evaders with hidden Swiss accounts, raising the temperature of discussions between the neighbouring countries who have agreed, but not ratified, the tax deal meant to sweep these accounts clean.
Zeltner said German authorities have not told UBS what data they hold. As a result, UBS is unable to rule out the possibility it may be targeted by authorities as rivals Credit Suisse CSGN.VX and Julius Baer BAER.VX have been.
“Tax matters are the client’s responsibility, but they must confirm to us they are compliant,” Zeltner said, illustrating UBS remains vulnerable to tax crackdowns.
Both Credit Suisse and Julius Baer settled their German probes by paying fines.
Gabriel’s Social Democrat party is seeking to sink the tax pact, under which Switzerland would impose a retroactive withholding tax on capital in Swiss bank accounts held by Germans and would tax future interest income from those accounts. But the account holders would remain anonymous and face no further action.
NRW said the data it bought showed money may be flowing into structures set up with the express purpose of avoiding the withholding tax. Gabriel’s comments as well as NRW’s data purchase have cast doubt on whether the withholding tax will be finalized, although German Chancellor Angela Merkel backed it again yesterday despite the opposition.
Reporting By Katharina Bart; Editing by Erica Billingham