IRS tries to force UBS to reveal U.S. tax dodgers

[TallBill]

Link

SAN FRANCISCO (MarketWatch) -- UBS AG kept as many as 52,000 secret Swiss bank accounts for U.S. taxpayers and the firm should turn over information on all of them, the Internal Revenue Service said Thursday.

UBS said it would fight the demand, citing Swiss financial privacy laws, U.S. law and an agreement the bank already has with the IRS.

UBS agreed on Wednesday to pay $780 million in fines and other payments for helping U.S. clients avoid paying taxes. Switzerland's largest bank and the country's financial regulator also agreed to turn over the identities and account information of some of these customers to the U.S. government. See full story.

The move is unprecedented for a country that's built its banking industry on privacy for centuries. In agreeing to reveal the identities of some account holders, Switzerland is walking a fine line.

"Switzerland's offshore private banking industry is trying to assure its foreign investors that the country still provides the same level of protection as before, while at the same time ordering UBS to disclose names to U.S. authorities," Alois Pirker, a senior analyst at consulting firm Aite Group, said.

"This reassurance is extremely important," he added. "The ultra wealthy have many options available and will certainly not hesitate to move their assets should Switzerland prove to be an unreliable partner."

The IRS filed a civil lawsuit Thursday asking a U.S. district court in Miami to order UBS to disclose the identities of U.S. customers with secret Swiss bank accounts. The lawsuit claims as many as 52,000 U.S. taxpayers had these hidden accounts.

Roughly 20,000 accounts held securities, while 32,000 had cash in them. By the middle of this decade, the accounts held almost $15 billion in assets, according to the IRS.
The court gave the IRS permission last year to serve UBS with a so-called John Doe summons. These types of summonses don't require specific individuals to be named, so they have the potential to uncover lots more information. The IRS said Thursday that its summons covers all the 52,000 UBS accounts.

"At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes," John DiCicco, acting assistant attorney general for the Justice Department's Tax Division, said in a statement.

Offshore financial centers have argued against John Doe summonses, often calling them fishing expeditions that impinge on the privacy of clients.

Alain Bichsel, a spokesman for Switzerland's financial regulator, said UBS will hand over information on accounts where the bank thinks they are connected in some way to tax fraud, noting this is part of the bank's settlement with the Department of Justice on Wednesday. He declined to comment further.

UBS said Thursday that it has "substantial defenses" and will "vigorously contest" the IRS's efforts to enforce the John Doe summons.

"Objections to the enforcement of the IRS summons are based upon U.S. law, the terms of UBS's Qualified Intermediary Agreement with the IRS, Swiss financial privacy and other laws, and the principles of international comity that require U.S. courts to take into account foreign laws," the bank said.

The Swiss government has so far decided to turn over information on 12 accounts, but only after the account holders have been given the chance to challenge the decision in Swiss court, Barry Schott, a deputy commissioner at the IRS, said in court documents released Thursday.

A tax treaty between the U.S. and Switzerland requires that information be exchanged to help prevent "tax fraud or the like," Schott noted.

The Swiss government has decided that there isn't enough evidence of "fraud and the like" connected to two other accounts, so it won't provide information on them, Schott added.

"The Swiss Government has not provided any records sought under the Treaty Request, and it is not clear when, if ever, they will," he concluded.

Sounds good to me. Tax evaders definitely aint helping our problems and should be slammed hard. I wonder how much tax gets illegally avoided by keeping money "offshore".

 

[Lemon law]

The USA has UBS by the shorthairs, and the treasury department has to say in no uncertain terms, no 52,000 account disclosure, no bail out money for you UBS.

If this goes to the lawyers, the disclosure will never come.

There is probably enough back taxes, penality and interests, in those 52,000 illegal accounts, to pay a good part of the bail out.

 

[jpeyton]

Weak. What's the point of having a foreign bank account if you can't evade the tax man?

 

[TallBill]

Originally posted by: Lemon law
The USA has UBS by the shorthairs, and the treasury department has to say in no uncertain terms, no 52,000 account disclosure, no bail out money for you UBS.

If this goes to the lawyers, the disclosure will never come.

There is probably enough back taxes, penality and interests, in those 52,000 illegal accounts, to pay a good part of the bail out.

Yeah, these are definitely not going to be small accounts.

 

[Craig234]

The time has come for there to be no 'safe haven' for tax evasion. It's financial piracy.

We condemn the pirates who steal on the seas, but let the billions in off-shore accounts evade taxes with impunity.

It's nuts, and we're nearly all paying the price as the concentration of wealth cntinues to choke productivity and prosperity and to increase corruption of government.

Time for economic sanction against any nation who won't end their complicity.

 

[sactoking]

First The Pirate Bay and now UBS.

It's nice to know that not only will we send troops anywhere in the world to make people kowtow to our every whim, but we'll sick attorneys on them too.

Note to US politicians and companies: If the Swiss wanted to adhere to your laws, they wouldn't be in Switzerland!

 

[TallBill]

Originally posted by: sactoking
First The Pirate Bay and now UBS.

It's nice to know that not only will we send troops anywhere in the world to make people kowtow to our every whim, but we'll sick attorneys on them too.

Note to US politicians and companies: If the Swiss wanted to adhere to your laws, they wouldn't be in Switzerland!

The deposits are originating here so yes, the US can control them.

 

[imported_Lothar]

Originally posted by: Lemon law
The USA has UBS by the shorthairs, and the treasury department has to say in no uncertain terms, no 52,000 account disclosure, no bail out money for you UBS.

If this goes to the lawyers, the disclosure will never come.

There is probably enough back taxes, penality and interests, in those 52,000 illegal accounts, to pay a good part of the bail out.

UBS has already been bailed out by the Swiss government.
They don't need any TARP money.

 

[dahunan]

Originally posted by: sactoking
First The Pirate Bay and now UBS.

It's nice to know that not only will we send troops anywhere in the world to make people kowtow to our every whim, but we'll sick attorneys on them too.

Note to US politicians and companies: If the Swiss wanted to adhere to your laws, they wouldn't be in Switzerland!

If US Citizens want to be protected by Swiss laws then they should seek residency there and leave the USA

 

[Eeezee]

Interesting idea, but it will never work.

 

[Thump553]

This was a tax defrauding scheme set up and aggressively pursued by UBS-they designed the plan and actively solicited their customers to participate in it.

Since you can't jail a corporation, the next best thing would be to revoke their charter and bar them from doing business in the US if they don't cooperate in exposing their criminal schemes. UBS claiming some sort of entitlement to bailout funds is way, way over the top.

 

[EXman]

Here is the problem. Why would an institution led by a tax dodger go after anyone? hell go after some of the slimey Washington politcos it sounds like nobody pays thier taxes there. He can go to dinner parties and do some investigating!

 

[Zebo]

I thought most people were smart enough these days to quit the Swiss, who are not so secret, and go to the Island banking centers who really are secret. Couple holdovers it looks like.

Many don't understand how they evade but it starts with foreign 'corps' are allowed to invest in our capital markets tax free on gains. and goes from there. To spend your shells tax free gains at home without IRS attention that corp and it's officers is issued a credit card, check book, trav checks etc, from that Barbadian bank to spend those gains as they wish in secret. Another big reason they do it is asset protection.

 

[sactoking]

Originally posted by: TallBill

Originally posted by: sactoking
First The Pirate Bay and now UBS.

It's nice to know that not only will we send troops anywhere in the world to make people kowtow to our every whim, but we'll sick attorneys on them too.

Note to US politicians and companies: If the Swiss wanted to adhere to your laws, they wouldn't be in Switzerland!

The deposits are originating here so yes, the US can control them.

Not according to Swiss law.

Originally posted by: dahunan
If US Citizens want to be protected by Swiss laws then they should seek residency there and leave the USA

It's a business transaction subject to Swiss law. So if US Citizens want to do business with Sony in Japan, they need to become Japanese citizens? If they want to buy Bayer pharmaceuticals, they need to become citizens of an EU country? No, they don't, and the transactions are still subject to the law of the sovereign country in which they take place.

 

[Dari]

UBS and the Swiss are fucked if they try to fight this. They both know they're in the wrong and this isn't exactly the best Administration to tangle with. IMHO, they should've made a deal with the Bush Administration.

 

[ayabe]

Especially because the Swiss don't have a great track record, i.e. Nazi deposits.

The people that participated in this scheme however should have their assets seized followed by a lengthy imprisonment in a federal penitentiary.

 

[Lemon law]

The choice is still on the part of UBS, they don't have to take the bail out money and can go broke for all I care. But if they want their asses bailed out, they have to come up with all 52,000 names is the way it would work IMHO.

 

[Michael]

There is a US law that requires US Citizens and Residents to report any foreign bank account with $10K or higher in it. This is mainly an anti-money laundering law, but it also serves other purposes.

The USA taxes on world-wide income, so even if you make profits overseas and then reinvest the profits, as an individual you are subject the US taxes. That includes reporting the income on your tax return.

Their are 2 central points to this case - 1) UBS was operating in the USA and accepting depositis into their bank knowing that there is a requirment for the individuals to report the accounts and 2) they were actively soliciting the deposits as a was to evade US taxes.

There is nothing illegal about holding your cash overseas as long as you report it and pay any tax owing.

Michael

 

[dainthomas]

What is the point of having a Swiss bank account if the gov't can still get their mitts on it? If I was Richy McMoneybags I'd just give them the finger and move all my cash (and myself) to the Caymans or Monaco.

It's totally symbolic (just like the rest of this). Any extra revenue they see will be a pittance. People smart enough to have that kind of cash aren't going to let themselves get busted by some bumbling bureaucrats. Especially if it's tied up in courts forever.

 

[Zebo]

Originally posted by: Michael
There is a US law that requires US Citizens and Residents to report any foreign bank account with $10K or higher in it. This is mainly an anti-money laundering law, but it also serves other purposes.

The USA taxes on world-wide income, so even if you make profits overseas and then reinvest the profits, as an individual you are subject the US taxes. That includes reporting the income on your tax return.

Their are 2 central points to this case - 1) UBS was operating in the USA and accepting depositis into their bank knowing that there is a requirment for the individuals to report the accounts and 2) they were actively soliciting the deposits as a was to evade US taxes.

There is nothing illegal about holding your cash overseas as long as you report it and pay any tax owing.

Michael

So what? You're required to report sales taxes from interstate internet sales too, and only 2% do. With predators out there like the IRS, divorces, creditors, and lawsuits - this reporting of your IBC, walking trust, Offshore account, whatever, is basically a question of conscience even less so than sales tax because their is virtually zero chance of getting caught due to secrecy laws in island banking centers. I'd say 0% claims them because the whole reason to set them up is evasion in the first place.