Sunday, September 4, 2011

U.S. Ups the Pressure on the Swiss to Rat Out Their U.S. Clients (9/4/11)

In the continuing game of chicken between the Swiss government (perhaps better described for this purpose as the Swiss financial system) and the rest of the civilized world (at least the part that is serious about their income tax systems), the U.S. appears to ratcheting up the ante. As reported in the press (I give a Reuter's link below, but there are a number of other reports with similar hard facts (few) and speculations (many)).

The hard key fact is that U.S. Deputy Attorney General James Cole wrote a letter in which he demands that the Swiss turn over a lot of information related to U.S account owners.  The precise details of the letter are unclear, but there are speculations.  For a sample of the combination of facts and speculations, here is a sample the Reuters' article linked below:
The SonntagsZeitung quoted Swiss sources close to the talks as saying Washington is seeking details of all U.S. clients with accounts worth at least $50,000 between 2002 and 2010 at banks including Credit Suisse, private banks Julius Baer and Wegelin as well as the Zurich and Basel cantonal banks.

That could imply tens of thousands of accounts, the paper said, far more than Switzerland could deliver under a double taxation agreement with the United States that it approved in 2009 but is still awaiting ratification by the U.S. Senate.

Switzerland is keen to find a solution that would not need approval from parliament, seen as likely to block any new breach of bank secrecy after only reluctantly agreeing to the UBS treaty under emergency law last year.

If Switzerland does not comply, the United States could issue a subpoena against the banks to force them to hand over data, as it did in the case of UBS, the SonntagsZeitung and NZZ am Sonntag reported.

"This will be much more expensive as with UBS that had to pay a fine of $780 million," one banking source told the SonntagsZeitung. "We expect that the Swiss banks will have to pay a fine of up to 2 billion Swiss francs ($2.6 billion) and deliver much more client data than in the UBS case."
Emma Thomason, U.S. sets ultimatum in Swiss bank tax dispute: reports (Reuters 9/4/11) here.


  1. "worth at least $50,000 between 2002 and 2010",

    that is a warning for all who think they are too small to be caught.

    sooner or later, IRS will demand other banks in other countries for those with over $50K.

    glad to be in OVDI now -:)

  2. Per article:
    "Last month, Switzerland struck deals with Germany and Britain to tax money kept by their residents in secret Swiss accounts and also introduce a withholding tax on future interest earned, a proposal rejected by Washington."

    This is what the Swiss have set up with the EU. Withholding which is remitted to the specific countries in aggregate, while keeping banking secrecy.

    I wonder why the US will not agree to this. This rejection is suspicious. If the US does not want the tax money, what do they want? To play Big Brother to us?

    Also why the difference between the Swiss Parliament (do not want to break secrecy) and "Switzerland" (wants to comply)? Who exactly is the "Switzerland" that wants to disclose, contrary to Parliament's wishes.

    Either the Swiss are digging themselves into a hole, or maybe the US is.

    Canadians are already up in arms over these FBAR penalties since so many of their citizens are also US "persons".

    If the battle is for world opinion, as to which is a more civilized country I would advise the US Deputy Attorney General to tone it down.

    Secondly I don't see how anyone in the US can threaten another country over a flow of money or wealth.

    If the Swiss were to complain that too many people are parking their money in US Treasuries instead of the Swiss Franc, and the US should give the Swiss some of that money, I doubt the US would agree.

    If people park their money in Switzerland instead, I don't see what right the US has to it.

  3. I think maybe the Swiss are getting the message that enabling tax evasion for U.S. persons is going to result in problems. I think the U.S. government may be finding out through disclosures that many Swiss account holders moved their holdings to smaller Swiss banks instead of disclosing during and after the UBS saga. Like ij said above, its a good thing for those who joined OVDP or OVDI. I predict that either the Swiss will buckle or they won't. Can't go wrong with that prediction.

  4. TO M's comment

    I just cant let this pass! I have tried to hold silence, and failed miserably!

    First, the mandatory withholding scheme is nonsensical, in my humble opinion. It does not address the core issue of whether the capital in the account is previously reported income and taxed.

    Also, it would be easy to structure around that type of arrangement through nominee entities, etc. while the Swiss Bankers look the other way. Oh, they wouldn't you say, they have learned their lesson you say? And what did they do when UBS was originally uncovered? Moved the accounts to other banks. Now da tiger don't change its stripes in my rationale world.

    Second, in world's opinion, between Swiss and US, I think the Swiss will win hands down--in Switzerland. Every other place will applaud the US's efforts to stamp out Swiss-enabled evasion. So please do not try that one.

    The AAG and DOJ are doing exactly the right thing: get names and numbers and kick rear ends. This is the only way to stop this nefarious conduct.

    I agree with the other comments--good to have disclosed, bad not, and worse to come.

    Have a

  5. You are right. The tiger don't change its stripes. So what to do? Beat the Park Ranger harder?

    By using "entities" (IBCs and trusts) and nominee directors one can hold money anywhere in the world in the name of a law firm employee in the Caribbean. The Swiss would have no idea who's money it is, neither would anyone else.

    I understand that not only people moved money out of UBS but they registered it as foundations, or in the name of private bankers, investment companies, and law firms, so that UBS cannot know who's it is. Kind of like numbered bank accounts, that the Swiss bank itself does not know who they belongs to. (The Swiss did away with numbered bank accounts by the way.)

    This is not a war that the US (or anyone else) can win, at least not by direct confrontation. The Swiss are just middlemen here. It is not their money, and they have no control over it.

    Another solution must be found.

    Second, after reading this article, I realized that the AG's words are a tell. His bark is worse than his bite. If they were going to indict a Swiss bank, they would have done so already. I think they have a diplomatic and political problem which is preventing them from moving forward. So they just bark for now.

    They are hoping someone will remove that political fence so they can attack, but seeing that dog's behavior, most would reinforce the fence instead.

    Taxation is an economic matter and can only be solved economically. By criminalizing it, the US not only shows that it does not understand economics, but is becoming a pariah.

    Thirdly, maybe that is why the FBAR penalties are so high. They assume that the money was never taxed to begin with so they are going to tax it now twice, the interest and the original amount.

    Bona fide taxpayers are paying for US' errors.

  6. "Taxation is an economic matter and can only be solved economically. By criminalizing it, the US not only shows that it does not understand economics, but is becoming a pariah."

    Nonsense. Please tell me the names of some countries that have a formal system of taxation and do not have criminal penalties for breaking tax laws. Even Switzerland has criminal penalties for so called tax fraud, and very high civil penalties for tax evasion (it could well be argued that excessive civil penalties are equivalent to criminal penalties). Even countries that don't have personal income taxes have excise taxes, sales taxes, corporate taxes, customs duties, VAT, etc. and have criminal penalties.

    Without criminal penalties, taxation becomes merely a probability game, and taxpayers will evade taxes if they can simply pay up when caught and it doesn't make economic sense to be honest with your taxes. But with criminal penalties, its a different matter since most people will try very hard to keep themselves out of jail.

  7. This attitude if our government is amazing. Hope better sense prevails.

  8. Did not the DOJ make a lot of noise in the final days of the 2009 OVDP? This noise could entice those sitting on the fence to disclose. It must have had impact in 2009 as 3000 came forward after the deadline. On the other hand, would such a high up official in DOJ make such a threat without the intention to follow through on it? One way or the other the Swiss will pay a heavy price and they seem to acknowledge that. The big question is how much account information will they deliver? As for those still holding undeclared assets at any of these banks, its time for a serious gutcheck. Can you say: "Get in line brother"

  9. From the Wall Street Journal:
    ZURICH—Swiss bankers and politicians on Monday tried to deflect growing pressure from U.S. authorities on Switzerland to reveal additional client data in a continuing tax dispute between the two countries.

    Concerns arose over the weekend that the banks may have to hand over more client data by Tuesday, as details of a letter from U.S. Deputy Attorney General James Cole asking for more account information from potential U.S. tax dodgers became public, triggering a sharp response.

    "The U.S. must comprehend that a solution must be found within the existing Swiss legal framework," Patrick Odier, chairman of the Swiss Bankers Association, told a meeting of the banking lobby group on Monday. "Bank secrecy protects assets, it doesn't hide them."

    Since the outbreak of the financial crisis, Switzerland has been under constant pressure to water down its banking-secrecy laws. Stress for Swiss banks was increased by international attempts by foreign governments to crack down on tax evaders with undeclared funds in Swiss banks. The country so far has responded by signing new tax deals with a several countries, including the U.K. and Germany, which besides the U.S. have been among the most vocal critics of Switzerland's banking-secrecy laws that have helped the country attract trillions of dollars in funds.

    The dispute with the U.S. escalated in 2009, when U.S. authorities pressed UBS AG to hand over thousands of client names following allegations that the banking giant helped American clients dodge taxes. The Swiss government stepped in and made a deal with the U.S. to shield its banking-secrecy laws and protect UBS from further legal fallout.

    As part of the deal, analysts say, U.S. authorities left the door open for another crackdown on Swiss banks if they could prove other banks helped U.S. clients evade taxes. "The recent U.S. lawsuits against Swiss bankers are now making such action possible," said Bank Sarasin banking analyst Rainer Skierka. Several Swiss bankers have been indicted in the U.S. recently.

  10. "We are in permanent contact with the U.S. authorities," said government spokesman Mario Tuor. "We have always said that the agreement with the U.S. should be in line with Swiss law," he added, declining to be more specific. Swiss ministers in August tried to resume negotiations with the U.S. after talks hit an impasse on how to handle alleged tax dodging by several banks. It was unclear whether talks have resumed.

    Fears are rising that banks could now come under further scrutiny following Mr. Cole's letter, which was made public by a Swiss newspaper. The letter asked for all data concerning private clients and U.S. foundations that deposited at least $50,000 in Switzerland between 2002 and July 2010 at a number of banks, including Credit Suisse Group.

    Credit Suisse declined to comment.

    Analysts say U.S. authorities, which are thought to be close to ratifying a tax treaty with Switzerland, could pursue a strategy similar to the one used to crack down on UBS, which in 2009 struck a $780 million settlement with U.S. authorities to avoid an indictment.

    Some Swiss politicians said the country shouldn't succumb to U.S. pressure. "The move of the U.S. is unacceptable," Swiss parliamentarian Bruno Frick, a Christian Democrat, told Swiss daily TagesAnzeiger. Philip Mueller, from the business-friendly Swiss Radical Party, criticized the U.S. approach but also said the banks have to comply with the law.

    Another assault on Swiss banks could result in hefty fines and hurt asset flows into Switzerland, analysts say. According to Boston Consulting Group, Switzerland is the world's biggest offshore financial center, managing assets valued at $2.1 trillion last year. Besides being home to banking giants such as UBS and Credit Suisse, several hundred smaller, private banks do business in the country.

    Amid efforts to solve the tax dispute with the U.K., Switzerland in late August agreed to charge previously undeclared British deposits in Swiss accounts with a levy of up to 39% on income in the accounts. The agreement follows a similar deal with Germany, which was also struck in August, ending a years-long confrontation between the neighboring countries.

  11. Greetings

    I have an old bank client from the 1960s and he now hs about $400 million plus since August of 1974 I know I was his banker.

    Now we filed this claim at their request under the Voluntary Disclosure Act of 2009 providing them with all viable account data. However at this time they don't seem to be able to get the Swiss to come clean with an accounting of the funds so Uncle Sam can get his fair share of interest and my client can get access to his $.

    It's an old secret numbered Form B account converted to Form A in 1998.

    Now I have tracked down monies and other assets all over the word and I am baffled as to what the IRS hasn't been able to get the Swiss to come clean. They the Swiss are still going to have control and use of the $ to make their huge profits and by the way my client is not one of these so called Tax Cheats that the US is going after.He just lost track of his money over many years until I found it in 1997.

    Thanks for your time.

    L Hiram(Larry)Adams
    2634 W.Berridge Ln.Ste. C11
    Phoenix,AZ 85017-2216 USA

  12. Noticed this about a class action lawsuit against UBS....

  13. Holy MolyI wish I could "JUST LOSE TRACK OF 400'000'0000+ $" !!!!! :-O
    And I'm supposed to get the endoscope inserted up my, you know where, for 50'000$ ??????


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