By Joshua Franklin
BERN (Reuters) - Switzerland, a perennial target for governments pursuing tax evaders, is finding out what it is like to chase down hidden cash.
The Swiss finance ministry said on Thursday it had reached a deal with Liechtenstein to exchange tax information, potentially helping to uncover billions of dollars in undeclared assets kept by Swiss citizens in neighboring Liechtenstein.
"These assets will be declared and the person has the chance either to repatriate the assets to Switzerland, or he will be taxed and he keeps his money in Liechtenstein," said Joerg Gasser, head of the State Secretariat for International Financial Matters, a branch of the finance ministry.
The amount of undeclared Swiss assets in Liechtenstein, a principality of just 38,000 people sandwiched between Switzerland and Austria, is unknown.
However, around 3.5 billion Swiss francs ($3.5 billion) could be with Liechtensteinische Landesbank (S:LLB), one of the country's biggest banks, according to an estimate by Andreas Brun, a banking analyst at Mirabaud Securities LLP.
The situation is a role reversal for Switzerland, whose strict bank secrecy laws for years had made the wealthy Alpine country a haven for hidden money.
A turning point came in 2007 when Bradley Birkenfeld, a former employee at UBS (S:UBSG), blew the whistle on tax evasion practices - including smuggling diamonds in a toothpaste tube - and opened the door for a broader clamp-down on tax evasion in Switzerland.
UBS, Switzerland's biggest bank, and cross-town rival Credit Suisse (S:CSGN) eventually paid $780 million and $2.6 billion respectively to U.S. authorities over charges they helped wealthy Americans evade tax.
The Swiss-Liechtenstein agreement is under a global tax sharing initiative spearheaded by the Organisation for Economic Co-operation and Development (OECD).
Under the OECD's Automatic Exchange of Information (AEI), banks pass on information to local tax agencies, which in turn share it with foreign counterparts.
(editing by Ralph Boulton)