UBS says IRS ignoring international law, diplomacy

A high-stakes battle over Swiss banking secrecy is heating up in federal court in Miami.

Swiss banking giant UBS – battling the Internal Revenue Service's efforts to force it to name 52,000 U.S. customers with foreign accounts – argued in court papers that the agency's aggressive pursuit of international tax cheats ignores international law and diplomacy.

UBS argues in a 50-page brief filed in federal court Thursday that an IRS civil suit seeking confidential customer information puts the bank in the difficult position of having to decide whether to obey U.S. law or Swiss law.

"Despite the clear historical record, the IRS now asks this court to force a Swiss financial institution and its employees, over the express objection of the Swiss government, to violate Swiss law by producing a massive quantity of confidential account information located exclusively in Switzerland."

The IRS is scheduled to respond to UBS's court brief in June, and a hearing on the issue is set for July 13.

At the heart of the legal battle is an IRS "John Doe" summons. The Justice Department filed the civil summons on behalf of the IRS in July 2008 and sought to enforce it in February 2009. It asks for the names and account details of U.S. taxpayers with foreign accounts totaling an estimated $14.8 billion.

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