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ZURICH (Reuters) - Switzerland is to announce plans to clean up its reputation as a haven for untaxed money by demanding that banks force clients to declare their money is taxed, part of an attempt to put an end to a damaging U.S. investigation.
Under a 'clean money' strategy, which Finance Minister Eveline Widmer-Schlumpf is expected to present to the cabinet on Wednesday, banks will be obliged to get foreign clients to declare they are compliant with their home tax regimes.
The plan falls short of measures desired by left-wing Swiss politicians to require bank clients to prove taxes had been paid. Hansjoerg Hassler, head of the parliamentary party of Widmer-Schlumpf's Conservative Democrats (BDP), hopes however it will be enough to coax the left-wing into supporting a U.S. tax pact vote next week.
"A clear aim of the 'clean money' strategy is that domestic and foreign money is taxed," he said.
A global crackdown on tax dodgers by cash-strapped governments has dragged Switzerland into the glare of international tax authorities and forced the country to lift the veil on its cherished bank secrecy.
By opening the door to self-declaration, Widmer-Schlumpf is making overtures to the Social Democrats (SP), whose support she needs in a crucial parliamentary vote on February 29 to allow Switzerland to meet U.S. demands to hand over bank client data.
The SP is only willing to back the U.S. accord, which will allow Switzerland to transfer client data based on behavioural patterns, if the government obliges banks to get written confirmation from clients that their money is taxed.
Switzerland wants investigations by U.S. tax authorities into 11 banks, including Credit Suisse CSGN.VX and Zuercher Kantonalbank (ZKB), to be dropped, in return for the payment of a hefty fine and the transfer of names of thousands of U.S. bank clients. It has been lobbying for almost a year to that effect.
In a sign the noose is tightening, earlier this month U.S. authorities indicted Wegelin, Switzerland's oldest private bank, on charges that it helped wealthy Americans hide up to $1.2 billion (760 million pounds) in untaxed assets in offshore bank accounts.
Bank chiefs have lampooned as unworkable proposals that clients present proof that their money is taxed.
"As a bank ,if you have a client give you money you have to trust and believe them...You can't be responsible for whether clients have paid their taxes," said Thomas Sutter, spokesman for the Swiss Bankers' Association.
Hassler said the strategy would focus on self-declaration as part of a raft of other measures: "The responsibility for the money must clearly remain with the clients."
The latest push for banks to put their houses in order comes in the wake of other measures including deals with Germany and Britain to allow citizens to pay tax on secret accounts without revealing their identities.
Banks, worried about getting caught in the U.S. Department of Justice's net, are keen for Berne to strike a deal with Washington as soon as possible.
"It's also our wish to haul the Swiss finance place out of the 'tax dog house'," Vontobel Chief Executive Zeno Staub told the SonntagsZeitung newspaper in an interview.
"Many people think you only seek out a Swiss banker if you want to optimise your taxes. That is false and is damaging the whole finance centre."