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Source: Reuters

ANALYSIS-Canada seen weak, uncommitted in UBS case

Published: 03 Sep 2009 16:46:28 PST

* Experts say Canada doesn't have tax clout to pursue UBS

* UBS case likely to be overlooked with election possible

TORONTO, Sept 3 - Efforts by Canadian tax officials to pursue Swiss bank UBS <UBSN.VX> <UBS.N> won't amount to much because politicians are distracted by a possible election and the country lacks enforcement clout.

A day after Revenue Canada officials pressed lawyers from UBS for details of Canadians who might be using UBS accounts to evade taxes, observers said on Thursday they did not expect the case to produce the same winning results as in the United States.

"The U.S. seems to have a far greater clout, far more sophisticated infrastructure," said opposition parliamentarian Yasmin Ratansi, the Liberal Party's critic for revenue issues.

"The Swiss bank does not declare unless it is absolutely pushed, and the U.S. had more push strategy than Canada has the power to push. So I'm not sure UBS will react in same way it did to the U.S.," Ratansi said in an interview.

The standoff between UBS and Ottawa follows a successful U.S. tax probe of Switzerland's No. 1 private bank. Washington accused UBS of using Swiss bank secrecy laws to help wealthy clients avoid paying taxes and forced it to hand over some treasured client data.

Now revenue officials in Ottawa want the same information.

Revenue Canada is trying to pressure UBS to name Canadian clients who have offshore accounts in a bid to clamp down on possible tax evasion, though it has not yet launched formal action to compel the bank to do so.

Officials had a phone call with UBS lawyers on Wednesday, during which Canada "clearly outlined the need to obtain this information from UBS," Revenue Canada spokeswoman Caitlin Workman said.

UBS confirmed the call took place, but declined comment.

Asked what Revenue Canada would do next, Workman said: "We're hoping to pursue meetings but I don't have any further information as to that."

While UBS's capitulation to the U.S. tax authorities is seen as a blow to global tax evasion, Toronto-based forensic accountant Al Rosen said Canada has never demonstrated the willingness or ability to get serious with tax cheats.

"They're not going to do a damn thing," Rosen said, dismissing Canada's case as a public relations move.

"How does Canada, given its size and where it sits in the world, going to muscle the same sort of activity that the U.S. can?" Rosen said.

"The U.S. can say 'Guess what, you're not going to be registered in the U.S. to do business anymore, so make up your mind, do you want a U.S. operation or do you want to sacrifice a few of your people who are running this out of Switzerland?' What is Canada going to do? UBS will say, 'OK, we're going to leave Canada.' Big deal."

Ed Morgan, a professor of international law at the University of Toronto, was also doubtful whether Ottawa would be successful in a legal case against UBS.

"They can go to court to try to compel UBS to disgorge names of Canadian taxpayers that have accounts there, but I'd say it's a toss-up as to whether they'd get that court order," Morgan said this week.

"It remains to be seen whether the courts think that banks are obliged to give up information about taxpayers that the taxpayers won't, on our voluntary disclosure system, give up," Morgan added.

Revenue Minister Jean-Pierre Blackburn, whose department oversees tax enforcement, has said Canada's laws need more teeth to pursue offshore tax evaders.

Blackburn wrote to Finance Minister Jim Flaherty, whose department is in charge of tax law, requesting tougher laws to compel banks to cooperate. Flaherty said he would review the proposals.

"There are lots of loopholes to be closed," said Ratansi. "There is a perception that there is C$6 billion ($5.5 billion) sitting in the Canada desk at UBS."

But whether Canada has the muscle to pursue UBS may be beside the point. The opposition Liberal Party has promised to present a motion of non-confidence in the minority Conservative government with Parliament resumes this month, and Ottawa politicians are now ensnarled in the drama of a potential election. An obscure tax case is likely to be overshadowed.

"The election stuff is buzzing around and whether we'll get the opportunity to take (the government) to task on this remains to be seen," Ratansi spokesman Ian Perkins said.

Rosen said at most he expected government officials to try to assure ordinary taxpayers that the wealthiest Canadians were not getting away with millions of untaxed dollars.

"You're going to get wishy-washy statements and wink-wink, nod nod, and 'Don't work too hard to carry this out,'" he said.

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