A new twist emerged in the political tug-of-war over the controversial "UBS Treaty" in the Swiss parliament, as the chances rise that the lower house of the parliament, the National Council, will pass the treaty. The party most strongly opposing the treaty now appears to have agreed to vote in favour of the deal in order to prevent a tax on bonuses.

The National Council’s economic commission appears likely to recommend passing the treaty, which regulates the transfer of data on up to 4,450 US UBS clients suspected of concealing money from the US tax authorities.

Less than a month ago, the foreign affairs commission of the National Council, not officially responsible for this policy field and only acting as an advisor, had recommended the rejection of the treaty.

However, the right-leaning Swiss People’s Party (SVP), which, with 62 out of 200 seats, has the most members in the National Council, but no majority, has said it will vote in favour of the treaty it had previously threatened to reject.

The SVP’s decision is politically based, as the party appears to agree to the treaty only in order to prevent a law to tax bonuses, something the Swiss Social Democrats (SP) demanded.

The economic commission recommended to reject plans drawn up by the Federal Council, the Swiss government, to regulate bonuses and to solve the problem of “too big to fail” institutions, such as the country's banking giants Credit Suisse and UBS. A similar commission in the upper house of the Swiss parliament, the Council of States, had previously agreed to the proposals.

The SP, which has 43 of the 200 seats in the National Council, had said it would reject the UBS Treaty if it would not be coupled with a tax on bonuses and solving "the too big to fail" issue. Due to the SVP’s general rejection of the UBS Treaty, it seemed possible for a while that the SP could pull this off, as their vote would have been needed to pass the treaty.

However, the SVP’s decision to agree to the treaty has changed this situation completely. SVP’s Hansruedi Wandfluh explained his party's change of mind by saying that he remains convinced that the treaty is undesirable, but that, as it would be adopted by parliament anyway, agreeing to it was his party's only way to prevent the introduction of a tax on bonuses.

Although the economic commission rejected the presented proposal on the too big to fail problem and a tax on bonuses, it still wants to find a solution for the potential need to bail out banks. 

Regardless of the economic commission's recommendation to vote for the UBS treaty, it will have to continue to work out details. This will take place on 2 July.

However, the chances that the National Council will agree are now high. SVP’s Wandfluh said: “I expect that the SVP will say 'yes' and accept the treaty."

Earlier this month, the Swiss Federal Council, the country's government, approved an amending protocol, revising the UBS Treaty, raising the agreement that was originally considered a convention to the level of a treaty.

This new agreement permits Switzerland to provide administrative assistance in cases not only of tax fraud, but also of continued and serious tax evasion. This remains controversial, as tax evasion is not a crime in the Alpine state.

Although the treaty has not yet been passed by parliament, it has been provisionally applied. This is possible under Swiss law in certain urgent cases to safeguard Swiss interests. However, until adopted by the parliament, no information will be passed on to the US.

Amending the original protocol became necessary after the Federal Administrative Court's ruling of 27 January blocked the original treaty, saying that data on cases of tax evasion could not be handed over to the US. This is said to have affected about 4,200 of the 4,450 cases.

Until the new treaty is adopted by the parliament, no information will be passed.

With regards to a tax on bonuses, SP politician Susanne Leutenegger Oberholzer said that she was very disappointed that the centre-right majority of the National Council is not willing to regulate bonuses. Her party will continue to fight for it, but other politicians have said that now the bonus tax will have no chance to pass the house.