The takeaway for U.S. taxpayers playing the offshore financial account game -- particularly with Swiss banks -- who have not done a voluntary disclosure (OVDP or OVDI), the risk/reward ratio is rising. Now is the time to reconsider whether to join the OVDI. Of course, after the OVDI ends in August 30, 2011 (subject to the good faith extension to obtain the necessary documents), the IRS may still permit taxpayers to come into a voluntary disclosure program but the costs will likely rise significantly.
Matthew Allen, The IRS is building up pressure, Swissinfo.ch (6/10/11)
Interesting additional points of Mr. Allen's article:
Rumours are circulating that Swiss and European banks will be invited to join a voluntary disclosure scheme that would inflict fines and the handover of client data in return for the US authorities dropping legal action.
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The IRS is now aiming further broadsides at other Swiss institutions such as Credit Suisse, Julius Bär and cantonal banks.
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The deal that Switzerland agreed with the US to hand over UBS client data does contain a declaration that the Swiss would “review and process additional requests for information…if they are based on the pattern and facts and circumstances that are equivalent to those of the UBS case.”
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Swiss financial legal expert Carlo Lombardini has doubts that politicians would be so keen to sign off another treaty that could lead to a further erosion of banking secrecy.
“UBS was a very flagrant case and even then the treaty was heavily criticised,” he told swissinfo.ch. “Switzerland cannot simply go on paying out fines and passing on client data. That would leave the door open for others to milk the country.”
Such a deal would also contradict ongoing negotiations between Switzerland and other countries to resolve tax evasion legacy issues.
The Swiss authorities hope to conclude unique treaties by the end of this year with Germany and Britain that would sidestep the need for client data transfer by paying out withholding taxes on undeclared accounts.
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US tax lawyer Asher Rubinstein [a frequent commenter on this blog] said a deal to hand more information would be a major victory for the US administration.
“This would free up significant resources for both the IRS and the Department of Justice that are currently being used to investigate bankers and US citizens,” he told swissinfo.ch.
Those investigations have already seen charges laid against four current and former Credit Suisse bankers while a former employee of the now defunct Neue Zürcher bank has been indicted in the US.
The size of Credit Suisse’s operations in the US would make it a prime candidate to take up the offer of disclosure to avoid prosecution, according to Rubinstein. Like UBS, Credit Suisse has many offices, staff and assets on US soil.
But there would be less sense in smaller Swiss institutions, such as cantonal banks, to sign up to the rumoured treaty.
“The advantage to such a deal would be to end legal prosecution quickly without additional negative publicity that would result in the flight of additional client assets,” he told swissinfo.ch.
“But I do not know why smaller banks, with limited or no presence in the US, would sign up to this. The IRS is able to wield a very big stick against banks such as Credit Suisse, because it could withdraw their license to operate. That stick is considerably smaller for the cantonal banks.”