GENEVA, Switzerland — The Swiss parliament has rejected a bill that would have allowed Swiss banks to reveal client information to US tax authorities.
Switzerland's lower house rebuffed demands by the American government to reveal information on customers who may be evading taxes in the Alpine country.
The bill would have also targeted Swiss bank employees who helped their clients hide money.
The National Council voted 126 to 67 on Tuesday not to discuss the bill, which means that it will be passed back to the executive branch to find a solution.
The Swiss Federal Assembly, which only sits for four three-week sessions per year, ends its summer session this Friday.
American authorities had demanded that the Swiss government act on the bill, which the Swiss have called “Lex USA,” by July 1 — but now it could be tied up in negotiations for years.
The bill had already been approved by the upper house, the Council of States, after threats by the US that Swiss banks could be cut out of the dollar market.
US courts have already fined two Swiss banks causing the closure of Wegelin, the country's oldest private bank, after it was eventually indicted.
UBS, Switzerland's most prominent bank, was ordered to pay $780 million and release information on 4,000 bank accounts in 2009 in order to avoid indictment by US courts.
The National Council rejected the highly secretive new law over worries that it would do serious damage to Switzerland's lucrative banking system.
The Swiss government now risks US retaliation over the decision.
“It is very likely that [the DoJ] perceived the Wegelin indictment as a shot across the bows of the larger more influential Swiss banks, and if that shot is not heeded, they very well may see no alternative but to turn the heat up on more economically important banks,” Beckett Cantley, a tax law expert at the John Marshall Law School in Atlanta, told swissinfo.ch.
“The DoJ is seeking not just to catch the existing crop of tax evaders, but also to permanently deter new tax evaders and their enabling bankers on a worldwide basis.”
Other banks that could be targeted are giants like Credit Suisse and Pictet, along with more local banks.
The Wall Street Journal reported that Credit Suisse had already set aside 295 million Swiss francs ($320.7 million) to pay US authorities.
Swissinfo.ch said that Switzerland's lead negotiator on the matter, Michael Ambuhl, believes that the country is now vulnerable.
“Whether we like it or not, the US has the ability to destabilize the entire Swiss financial center by taking measures against Swiss banks,” he was quoted as saying.
Though many US tax evaders have already come forward during a period of amnesty, it is believed that billions of dollars still reside in Swiss banks.