The U.S. and Swiss governments have concluded their negotiations over expanding the sharing of tax information to root out tax dodgers, and now plan to sign a protocol in the next few months.

Timothy Geithner

The Treasury Department announced the conclusion of negotiations with Switzerland, which have been occurring as the IRS presses the Swiss bank UBS to release information on approximately 52,000 U.S.-based clients, which UBS contends would violate Swiss banking secrecy laws. The Obama administration and Treasury Secretary Tim Geithner have made the closing of tax loopholes on foreign bank accounts and offshore tax havens a high priority (see Obama Seeks to Close Multinational Tax Loopholes).

“This administration is committed to reducing offshore tax evasion to help ensure that all U.S. taxpayers are playing by the same rules,” said Geithner in a statement. “This treaty will increase our ability to enforce our tax laws and will help bring an end to an era of offshore accounts and investments being used for tax evasion.”

The protocol would revise the existing U.S.-Switzerland income tax treaty to allow for the exchange of information for income tax purposes to the full extent permitted by Article 26 of the Organization for Economic Co-operation and Development Model Income Tax Convention.  

In recent months, the Obama administration has worked aggressively to persuade the Swiss and other governments to stop providing tax havens for hiding income. At the G-20 Summit in April, the U.S. strongly supported efforts to ensure that all countries adhere to international standards for the exchange of tax information.

In its fiscal year 2010 budget, the Obama administration delivered a detailed reform agenda to reduce the amount of taxes lost through unintended loopholes and the illegal use of hidden accounts by well-off individuals. The Treasury Department recently concluded Gibraltar’s first-ever tax information exchange agreement and also signed an agreement with Luxembourg to provide for greater exchange of tax information.