Saturday, February 20, 2010

Manhattan DA's Offshore Banking Tax Initiatives

Today's Wall Street Journal has an article by Amir Efat title The World's District Attorney, Part II (WSJ Online 2/20/10). These are the opening lines containing the parts dealing with tax:

Cyrus Vance Jr., the new Manhattan district attorney, is trying to step out of the shadow of Robert Morgenthau by doing more of what made his predecessor famous.

Six weeks into the job, the 55-year-old Mr. Vance has hired two veteran white-collar prosecutors and is launching an effort to prosecute New Yorkers who evaded taxes through offshore accounts.

The tax-evasion cases are a spillover from the Justice Department's yearslong probe of Swiss bank UBS AG. Federal prosecutors can't handle all of the cases, so they have handed some of them to Mr. Vance's office. A Justice Department spokesman declined to comment.

1 comment:

  1. "Federal prosecutors can't handle all of the cases, so they have handed some of them to Mr. Vance's office."

    I was surprised by this comment. First, it's surprising that the IRS would publicize that it lacks the resources to go after every non-compliant offshore account holder. The IRS does not want to give the impression that someone might squeak by. For instance, the Annex to the UBS settlement agreement, the one which listed the numeric criteria for disclosure of the UBS accounts, was not released for a while, because the IRS did not want an account holder to think that because he or she was below a certain dollar threshold, he or she was "safe". The delay in the release of that criteria contributed to a fear of prosecution, and that fear resulted in thousands of voluntary disclosure. Had the criteria been announced earlier, taxpayers may have felt that their accounts were under the threshold, and they may not have come forward.

    Second, the lack of resources comment may also seem surprising given the latest guilty plea (i.e., Silva, the first non-UBS client to be prosecuted), whose account at HSBC was valued at $250K. With limited resources, is it curious that the IRS would chose Silva's account rather than one containing a higher balance?

    Actually, no. The IRS wants taxpayers with non-compliant accounts to be on guard, whether the account contains $100,000 or $100 million. Again, the IRS doesn't want a taxpayer to think that he or she might squeak by with a smaller account.

    But then why publicize that "prosecuters can't handle all of the cases"? Why not just say that the IRS is sharing offshore information with New York State authorities? That is true, after all, and would contribute to taxpayer fear on two levels. In the context of the New Jersey Voluntary Compliance Initiative, the information-sharing between Federal and State was publicized and caused many NJ residents to come forward under both programs.


Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.