April 30, 2010

Swiss Seek Tougher Taxes for Bankers Move Comes as Government Pursues Support for a Bill That Would Allow Bern to Settle UBS Case

ZURICH—The Swiss government proposed tougher taxes on bank bonuses in order to shore up parliamentary support for a bill that would allow Bern to meet its obligations in last year’s settlement of a tax case with the U.S. government.

One proposal would compel companies to classify bonuses as a distribution of profits, rather than as personnel expenses. That way, the company would pay taxes on bonuses even if it posted a loss.

Employees receiving the bonuses wouldn’t, however, see any change to the taxes they pay on them, in contrast to the one-time tax on bonuses levied recently in the U.K.

In February, the Swiss government presented an ad hoc law that would lay the legal groundwork for it to hand over to the IRS the names of thousands of U.S. taxpayers who had secret accounts with UBS. Parliament is expected to vote on the bill in June, so that Bern can hand over the names by an August deadline.

That law has been deadlocked in parliament after some Swiss parties demanded the government restrain banker bonuses and strengthen capital rules for UBS and Credit Suisse Group as a solution to the “too big to fail” dilemma.

The debate over bonuses in Switzerland heated up again after UBS paid its top investment bankers huge bonuses for 2009 even as the bank posted a large loss. Soon after, Credit Suisse Chief Executive Brady Dougan cashed in options valued at more than 70 million Swiss francs ($64.4 million).

Switzerland moved more quickly than many countries in requiring companies to subject bonuses to claw-back provisions and to pay out some variable compensation over a number of years, but there is popular pressure to do more. The bonus measures presented Wednesday also include a provision to tax employee stock options at the time they are exercised, instead of when granted. The government didn’t indicate how much money its proposals could raise.


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