Having acquired fame for its legendary banking secrecy status, Switzerland has threatened UBS AG, the country's biggest bank, that it would rather seize its documents related to data of 52,000 US clients than allow the bank to transfer them to US courts.

UBS is accused by the US Federal authorities of facilitating tax evasion for its American customers by concealing their ownership of assets held offshore through bogus entities and then filing IRS forms falsely claiming the entities owned the accounts.

In February, the US Justice Department filed a lawsuit in the federal court in Miami to compel UBS to disclose the names of as many as 52,000 Americans who have hid billions of dollars in UBS Swiss accounts and evaded paying tax in the US. (See: US justice dept hauls UBS to court to force disclosures)

US authorities have secured a court order to seek information from UBS on US taxpayers suspected to be have avoided paying income taxes. The order, issued by a US district judge in Miami, allowed the US Internal Revenue Service to serve a summons on UBS to obtain information on possible fraud by people with unestablished identities. (See: US wins court order for UBS bank records; steps up probe)

UBS had always maintained that it could not reveal the names of its 52,000 American clients, since it would be liable for prosecution in Switzerland under the Swiss banking secrecy laws.

The Swiss government said in a filing with the Miami court, that it ''Will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons.''

Meanwhile, the Swiss government toughened it stance with the Swiss justice ministry saying in a statement, "Swiss law prohibits UBS from complying with a possible order by the court in Miami to hand over the client information.''

Miami court judge Alan Gold has now directed US President Barack Obama's administration to file a reply by Sunday as to what steps the US government would take if the Swiss government refuses to comply with a possible US court order to reveal the names of UBS's 52,000 American clients.

President Barack Obama, who had called UBS "tax cheats," during his election campaign in November had vowed to crack down on international tax havens and introduced a law as part of a wide-ranging revenue raising and tax reform package, where the crackdown could raise at least $50 billion a year in lost US tax revenues.

Switzerland is not a tax haven in reality but rather a place where one can hide assets, lock them away from prying eyes, and be safe in the knowledge that no one can ever lay their hands on them.

With the US and Europe mounting increasing pressure on the Swiss government to allow greater disclosure on the banking details of its banks' clients, the Swiss government in February, assembled a task force comprising justice minister Eveline Widmer-Schlumpf, foreign minister Micheline Calmy-Rey Merz along with bankers, diplomats, economists and legal experts to evolve a strategy to protect the banking interests of the country from nations that threaten to undermine its banking secrecy law. (See: Swiss government to defend banking secrecy)

In a move to target wealthy US corporations and rich Americans, who move their money illegally out of the US to offshore tax havens, President Obama had changed the US tax laws in May to help the US Treasury'sw attempt to net about $21 billion each year. (See: Levelling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas)

In November, UBS had disclosed information on 70 American clients to the US tax authorities investigating the tax evasion case and US investigators had managed to lay their hands on an additional 30 American holders of undeclared UBS accounts from whistle blowers. (See: UBS reveals US client details to Federal authorities)

So far, UBS has revealed 250 US client names to the US authorities after admitting that some of its employees had helped wealthy Americans hide their money in Swiss accounts and has even paid $780 million in penalties.

Swiss President Hans-Rudolf Merz had hinted of coming at an out-of-court settlement, but US authorities have declined, which has further strained US-Swiss relations on the tax haven issue.