The State of the John Doe Treaty Request to Switzerland (6/1/11)

U.S. double tax treaties have an exchange of information provision. After the U.S. put the full court press on UBS (John Doe Summons and criminal investigation), the matter was finally resolved with a deferred prosecution agreement for UBS (with a whopping fine) and an agreement with the Swiss government that it would process a John Doe treaty request -- i.e., a request for U.S. taxpayers identified only by characteristics (e.g., size of account and use of non-U.S. entities)). Because, prior to that time, Switzerland interpreted the US - Swiss double tax treaty restrictively, this solution required a treaty protocol. At more or less the same time, efforts at more transparency from tax haven jurisdictions were pursued by OECD and G-20 Ministers of Finance. The result is that Switzerland is trying to give the appearance of opening the kimono. (That is different than actually opening the kimono.)

All of this is laid out (or at least suggested) in the Joint Committee on Taxation, Explanation of Proposed Protocol to the Income Tax Treaty Between the United States and Switzerland (JCX-31-11), May 20, 2011. I recommend this report as an excellent summary of the issues with Switzerland and an historical summary of the developments in this area.
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