Tax Research UK

Reuters reports:

The U.S. Justice Department said on Tuesday it was pressing ahead with its five-month-old lawsuit against UBS AG to force the Swiss bank to identify thousands of U.S. clients with secret UBS accounts.

Despite recent media speculation about a possible settlement of the case, the Justice Department said in a brief filed with a Florida court that it was seeking to enforce tax compliance with the full weight of U.S. law.

Good news.

Justice may be done.

Richard Murphy Switzerland, Tax evasion

GFI: US Justice is Not for Sale « Task Force on Financial Integrity and Economic Development.

Task Force on Financial Integrity and Economic Development member Global Financial Integrity (GFI) has urged the U.S. Department of Justice (DOJ) to remain steadfast in its pursuit of information about the suspected 52,000 secret bank accounts held by U.S. citizens with Swiss bank UBS.

“This is about bringing to justice tens of thousands of tax-evading Americans and making it clear that the U.S. will no longer tolerate this type of behavior,” said GFI director Raymond Baker. “If we let UBS off the hook with a fine we’re letting the world know that U.S. laws may be flouted, bent, or just plain broken provided you have the cash to pay your way out of trouble.”

Mr. Baker also noted that the U.S.-Switzerland Tax Treaty agreement reached earlier in the month would do little to help tax authorities investigate and prosecute cases of tax evasion.

“The wording of the new agreement states that an exchange of information on tax matters will still only take place in ‘individual cases where a specific and justified request has been made,’” said Mr. Baker. “To see the shortcomings of this agreement just apply the new standard to the current case. U.S. authorities, under the new agreement, would have no additional capacity to obtain information than they do now. In the case of investigating banking secrecy, generating a ‘specific request’ is impossible.”

As I noted earlier today, this is a battle between pragmatism and justice.

At this juncture in the campaign against tax havens / secrecy jurisdictions justice cannot come second.

Richard Murphy Switzerland

The FT has noted:

An economic war has broken out between Switzerland and the rest of the world after the crackdown on Swiss banking secrecy, according to one of Geneva’s leading private bankers.

Yves Mirabaud, a managing partner at Swiss private bank Mirabaud, told the Financial Times that nothing was easier than dodging tax in the US and UK.

In rare public comments, the Swiss private banker said: “There is a feeling in the banking community, and also in the population . . . that we are in an economic war.

There is nothing easier than doing tax evasion in the US. Look at Delaware companies or trusts in the Channel Islands.”

That’s true. But it’s not chance that such a high proportion of the world’s dirty money is in Switzerland. So, to be candid, tax evasion is pretty easy there too: indeed their own bankers have estimated half their cash is dirty money. Which is precisely why we need automatic information exchange on who has bank accounts, foundations, corporations and other structures based or managed there. But according to the FT:

Swiss private banks and politicians are adamant that “fishing expeditions” from foreign countries to find out customers’ names – known as the automatic exchange of information – will not be allowed.

If this is where the battle line is drawn Switzerland will lose. Justifying tax abuse because others tax abuse is like justifying a murder because others have murdered. It just won’t do. The Swiss really need to understand that.

Richard Murphy Switzerland

UBS to pay 3-5 bln Sfr to close US tax probe-paper | Deals | Regulatory News | Reuters .

Switzerland’s UBS is to pay 3 to 5 billion Swiss francs ($2.77 billion to $4.62 billion) in the next two weeks to settle a U.S. tax probe into the bank, Swiss newspaper Sonntag reported on Sunday.

The U.S. government is suing UBS to get the names of 52,000 Americans who allegedly hid nearly $15 billion in assets from the taxman.

Sonntag, which said the figure of 3 to 5 billion francs had been confirmed by three independent sources, reported a deal could be signed between July 1 and July 13.

Earlier this week, the U.S. Justice Department said it was still willing to consider a settlement, but denied it was planning to drop the case and said it would file a brief seeking an enforcement of the summons on June 30.

Which is good for revenue raising and putting a price on systemic risk for those engaging in this market but bad for letting individuals off the hook.

Richard Murphy Switzerland, Tax evasion, USA

Finance Minister Hans-Rudolf Merz says new tax regime will not lead to a lot of money to flow to Germany. - swissinfo.

[The Swiss finance minister] speaking in an interview with the Frankfurter Allgemeine Zeitung, said his German colleague, Peer Steinbrück, was “dreaming” if he expected “hundreds of millions of francs” in tax money to come pouring in.

Merz was responding to Steinbrück’s comments earlier this year that German taxpayers have deposited €200-300 billion (SFr130–196 billion) in Swiss bank accounts, and that Berlin loses €1 billion annually through tax evasion.

The Swiss finance minister said last year, for example, SFr137 million in taxes was sent to Germany, a figure Steinbrück called a “joke”.

“According to the latest figures, there is approximately SFr5.4 trillion in total assets invested in Switzerland,” Merz told the German newspaper. “Half of this is from institutional investors who have no grounds to evade taxes or commit fraud.”

As ever the Swiss tell less of the story than actually exists.

Half that institutional money is structured through companies, foundations and other arrangemnts precisely to remain out of view under the European Union Savings Tax Directive.

Sure, a DTA won’t uncover this. A smoking gun is still needed under a DTA. But then the European Union Savings Tax Directive is extended to privately controlled institutions, then watch the money come home.

Richard Murphy EU STD, Switzerland

As the Guardian reports:

The canton of Obwalden is planning to launch "special living zones" for millionaires in an attempt to boost its tax take by luring the wealthiest residents. Like other cantons in the tax haven, Obwalden finds itself short of revenue because it has been competing with other jurisdictions to see who can offer the lowest rate of tax.

The result has been a drastic shortfall in tax revenues as people set up PO box companies to take advantage of the low rates, while contributing nothing to the local economies because they live elsewhere.

Obwalden’s answer is to lift construction bans on land reserved for agricultural use, offering the rich the chance to secure property on protected land, with the promise of spectacular views of lake and alpine landscapes.

There is of course considerable irony in this: like Jersey and Guernsey, Obwalden is heading for bankruptcy because it is offering tax haven tax rates to the wealthy who offer nothing in return. So now they’re actually selling the place – something the Crown Dependencies effectively did long ago when they sold their integrity to the financial services industry.

But, again just as in jersey and Guernsey, there are victims:

The homes would be constructed on land not usually accessible to ordinary citizens, leading to accusations that the policy discriminates against less wealthy inhabitants while rewarding the rich.

"These special living zones are nothing less than a form of apartheid," said Moritz Leuenberger, of the Social Democrats, who is Switzerland’s environment and transport minister. "Is a racing car driver of so much more use than a nurse?" he asked, referring to the rich personalities such as Michael Schumacher who have moved to Switzerland to take advantage of its favourable tax laws.

Many argue that the drive to draw in the rich is destroying communities as normal earners are forced out by rising prices.

In other words – as we know, tax havens destroy well-being.

And the myth that they do not is also extraordinarily harmful. The Obwaldeners voted to reduce their taxes three years ago,  bringing corporate tax down to 6.6% and local income tax down to 1.8% in reaction to pressure from its inhabitants – 90% voted in favour of the move in a referendum. And it introduced a flat tax at the same time. as the Guardian notes, the reaction was predictable:

While on paper it appears that 400 new companies moved to the area as a result of the changes, most are nothing more than PO box companies. They fail to offer employment to locals or boost consumer spending in the region.

Quite. There was no Laffer effect. The place was just being used to undermine the regulation and taxes of other places – classic secrecy jurisdiction behaviour.

So what now? The place is going bust: the sooner a few do the quicker this problem will be solved. It is abundantly clear that the Laffer curve is bunkum, flat taxes do not work, tax haven behaviour and low taxes harm ordinary people – so let’s get rid of these places and make clear there is not, never has been and never will be such a thing as beneficial tax competition.

Richard Murphy Economics, Secrecy jurisdictions, Switzerland, Tax Havens