So, the dust is settling. UBS has had to conceded, Swiss banking secrecy is seriously damaged, and now what?
Senator Carl Levin, has I note said:
The UBS settlement is at most a modest advance in the effort to end bank secrecy abuses, tax haven bank misconduct, and the tax haven drain on the U.S. treasury. It will take a long time before we know whether this settlement will produce meaningful gains due to treaty procedures which are complex, depend upon the Swiss government to carry out, and open the door to potentially lengthy appeals.
In the meantime, the IRS needs to keep up the pressure against offshore tax abuse, not only by going after more tax offenders, but also by taking action against other tax haven banks that have helped U.S. clients cheat on their taxes.
Congress also needs to act. If we want to stop offshore tax abuses that produce $100 billion in unpaid taxes each year and offload that tax burden onto the backs of honest taxpayers, it is essential that Congress enact the Stop Tax Haven Abuse Act which I and my colleagues introduced earlier this year and which President Obama has endorsed. Our bill would, for example, enable the United States to prohibit U.S. financial institutions from doing business with any foreign bank that impedes U.S. tax enforcement. That new authority would provide our government with a powerful new weapon to use against tax haven banks that help U.S. clients hide assets and evade U.S. taxes. The bill also contains a host of other enforcement tools that would strengthen our tax laws and help put an end to the $100 billion in offshore tax abuses each year.
I' agree with him on all that. But he’s got a single issue to promote. What is we think more widely?
First, what is clear is that this is a US deal. The US needs to make sure what it has secured is now made available to other states. This is critical.
Second, this is a tax deal, it needs to be extended to asset recovery, especially for developing countries. Switzerland is a favourite home for looted money.
Third, with the revised QI programme the US appears to be heading for Automatic Information Exchange (AIE). The UK is seeking to do the same through its attack on banks which the US needs to replicate). But if this so then why aren’t they promoting AEI at the OECD? Shouldn’t this be a next step? This has to be high on the agenda now both states have proved beyond doubt that Tax Information Exchange Agreements alone cannot provide the data we need to stop abuse. I have proposed a simple method of AEI that cuts out many of the objections raised to date.
Fourth, using the UK precedent it is time to prise open foreign banks as a condition of their right to trade in other states.
Fifth, as I have already suggested, we have to look at making lawyers, accountants and bankers and accountants in secrecy jurisdictions personally responsible for the advice they have given. This is easy in the USA. In a landmark case in 2005 the U.S. Supreme Court held that the proceeds of tax fraud are "property" for purposes of the wire fraud statute. Pasquantino v. U.S., 544 U.S. 349 (2005). And it so happens US law also says “Whoever, knowing that an offense against the United States has been committed, receives, relieves, comforts or assists the offender in order to hinder or prevent his apprehension, trial or punishment, is an accessory after the fact.” Which pretty much nails down all those in secrecy jurisdictions who have ever in any way assisted a US person commit tax fraud (an offence in Switzerland, note) as being liable to criminal prosecution in the USA.
Exploring this fifth option further, I think it high time the US pursued this. Of course, US jails might soon be full to overflowing. And that may not be of much benefit. So what are the alternatives for these people who have been what I call secrecy providers — the secrecy jurisdiction bankers, lawyers and accountants who facilitate the world's illicit financial flows? How can we break the back of their pernicious trade and turn it to good effect?
First, without doubt they have to get very worried for their security. That means serious prosecution risk has to be created.
Second, like others facing serious prosecution where our capacity to actually deliver justice in court is limited I think we’ll need an amnesty. How about a ‘truth and reconciliation’ commission for secrecy providers? If they come forward and admit their past misdemeanours, openly, with names given, then the US and other states will drop charges. Of course the tax havens would threaten them with prosecution for breaking secrecy laws — but that threat can be rendered internationally unenforceable by international convention that warrants issued with regard to offences relating to banking secrecy designed to permit felony in other states are not enforceable. So these people could live in peace — but at a price. Not just names which represent the truth — although these would be important — just as it would be important that they were only supplied to competent tax authorities an no others — but social service too as recompense for past errors. What about a year’s social service in pursuit of asset recovery for developing countries being the price required for reconciliation?
Now we turn a problem into an opportunity.
And if Switzerland wanted to get ahead of the game, why doesn’t it start the process now for its own lawyers, accountants and bankers, and negotiate group immunity from prosecution for them if evidence is given of firstly their delivering the service and secondly the banks and other organisations they work for delivering names — all names — to all jurisdictions whose tax systems they have undermined? Isn’t this what we need now, as well as what Carl Levin calls for and what I call for on AIE? because isn’t it something like this that would really make a difference, especially for developing countries?
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Richard,
I understand you interest to side with US Senator Levin when he wants to “stop offshore tax abuses that produce $100 billion in unpaid taxes”.
100 billion sounds perfect to drum up support for your cause.
However, this figure is disputed by no other than the head of IRS, Douglas Shulman. Last May (from Dow Jones newswires) : “Shulman dismissed an allegation often made by Levin that offshore tax evasion costs the U.S. Treasury as much as $100 billion per year in lost revenue. “There have been some wild estimates thrown out by academics that we don’t agree with,” he said. “Those are broad numbers that don’t have much basis.”
Senator Levin has a strong interest to deflect attention on the sorry economic condition of his home State (Michigan). Levin difficulties with objectivity are illustrated by his today’s statement (Aug. 20), when he talked about the “vibrancy of our businesses”, whereas Michigan sadly registers the highest unemployment rate (15.2 %) of all the 50 States.
Best
Bernard
Bernard
$18 bn from 4,450 individuals
And you think $100 bn an underestimate?
Rubbish!
Stop peddling Republican crap and face reality – you’ve been supporting those who break the law.
Levin can hold his head up high
And can claim credit when it happens for recovering a great deal of money for the USA
More than you’ll ever do, I bet
Richard
Richard
The 4,450 are estimated to have been hiding $18bn in *assets*, correct? Presumably the tax on this, had it been paid, would have been somewhat less than $18bn.
Nonetheless it looks like one could get to $100bn when one considers there were 52,000 account holders (even if not all were tax evaders), there are many other banks and Levin is presumably talking about a period of several years (ten years? it isn’t clear).
Colman
By the time taxes on the original evaded sum plus tax on the investment income arising plus interest and even the reduced rate penalties on offer are added I suspect the vast majority of that sum will end up in the hands of the IRS
And there are many, many more offenders now creeping out of the woodwork.
As there will also be in the UK.
Richard
Richard,
If you have arguments, use them, but please avoid human dejection vocabulary and populist statements (such as ‘stop peddling Republican crap’)
First, I am not saying $100 bn is an exaggerated figure, it is the Head of the IRS who says so (he should know better than both of us).
Second, contrary to what you say, $18bn is not the amount on the 4’450 accounts whose account owners may be divulged to the IRS, but the total amount once (when ?) held on those total 52’000 accounts.
Third, to assume as you do that this amount represents an equivalent amount lost to the US taxpayer is just plain wrong, unless you favor a 100 % tax rate (on money which may have already been taxed on income, in the USA or Switzerland, and therefore became a wealth element, subject to far lower tax rates).
Regarding the UBS case, you forget (along with many journalists in the US media) there are tens of thousand of Americans who live, work, study, retire in Switzerland. It is absolutely normal for them to have bank accounts in Switzerland, often at UBS the largest bank with the most important network of branches. This in itself does not make them tax cheats.
Americans abroad are expected to report their worldwide income to the IRS (facing possible additional taxes to those already paid to their home country), and most of them probably do so accordingly.
What is new is that lately the American expat community has discovered it must also report all their bank accounts abroad (the FBAR requirement), including the sums on them, and expect penalties which can be significant, even if those amounts were already declared to their residence country (for wealth tax calculation for example).
You consider they broke the law and paint them as tax cheats; the thousands who have performed the Voluntary Disclosure procedure are even framed as ‘confessing their sins’. I have another opinion, as those Americans were submitted to ‘taxation without information’ (the IRS did not communicate effectively on this issue), in addition to the fact that Americans abroad are the object of ‘taxation without representation’ (and also without many services provided by the USA to them in their current residence countries).
On this issue, please read what the American Citizens Abroad association wrote to President Obama and Chairman Volcker, describing “the perfect storm which is currently brewing against the estimated 5 million Americans who live and work abroad” : http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=305&Itemid=2 (the letter to Volcker with its Annex is the most comprehensive).
Senator Levin could be well inspired to read those letters and sponsor a ‘Stop Tax American Expat Abuse’ bill, this would bring him the gratitude of tens (hundreds ?) of thousands of Americans residing abroad or willing to move to foreign countries.
Have a good week-end
Bernard
OK Bernard
let’s try ‘comply with the law’
And the US, rightly in my opinion, charges its citizens to tax wherever they are – as it provides them with protection and the right to return – which every ex-pat (who, you will note defines themselves as a consequence by their US citizenship and origin)values, I am sure. If not, just let them give up their citizenship as the price of not paying tax.
None of your arguments stack
They all smack of one thing – greed and self interest
Richard