Thursday, January 15, 2015

Miscellaneous Offshore Account Articles (1/15/15)

This blog entry will be a catchall for various web articles on matters related to offshore accounts.  I have been heavily involved in client matters and preparing for an office move, so will only be able to post the article and links and perhaps some excerpts:

Irit Avissar,  Swiss banks target Israeli tax evaders (Globes 12/31/14), here.
Swiss banks are training their crosshairs on Israeli customers. Legal sources said that in the past two weeks, the large banks in Switzerland have begun sending many queries to their Israeli customers demanding confirmation either that the assets deposited with the banks were reported to the Israeli tax authorities, or that the customers have begun a process of voluntary disclosure to the authorities in Israel. 
"After dealing with their US and European customers, the banks in Switzerland have moved on to their Israeli customers. They have decided to verify that all the assets in their accounts are reported and are in compliance with the rules," said Adv. Leor Nouman, who heads the Tax group at the S. Horowitz & Co. law firm. 
The Israel Tax Authority is currently conducting an investigation against dozens of Israelis suspected of concealing assets through accounts at Swiss bank UBS. "Globes" revealed yesterday that Haifa District Court Judge Moshe Gilad is one of those being investigated. This investigation may also have been the catalyst for a decision by the Swiss banks to make requirements of all their Israeli customers. Last September, the Israel Tax Authority announced a new anonymous voluntary disclosure program giving Israeli citizens an opportunity to legalize their unreported assets. According to Nouman, the banks in Switzerland are aware of the Tax Authority's new program, and are encouraging their customers to join it.
Katherina Bart, Swiss citizens come clean on undeclared funds following probes (Reuters 1/7/15), here.
A U.S. criminal investigation into how Swiss banks helped wealthy Americans hide their money has had an unexpected side effect: shaking out scores of tax cheats among the Swiss themselves. 
Secrecy laws in Switzerland, the world's largest offshore financial center with trillions in assets, have been under siege in recent years from massive international pressure, including long-running investigations by U.S., German and French prosecutors. 
Despite widespread indignation in Switzerland over the campaign, and efforts to enshrine data privacy for residents into the constitution, data shows the Swiss have been coming clean in record numbers on their own undeclared funds. 
A total of 15,039 Swiss residents have filed voluntary disclosures since the government introduced an amnesty for its own citizens five years ago, according to Swiss tax data.
Officials say that number is set to rise as voluntary disclosures from 2013 and last year are processed by cantonal authorities and included in the overall federal tally.
Katharina Bart, Hacker posts client emails from Swiss bank BCGE (Reuters 1/9/15), here.
A hacker claiming to be behind a cyber attack on Banque Cantonale de Geneve on Friday divulged confidential client information after the Swiss bank failed to meet demands for payment. 
In the latest case of a breach of customer information at a financial firm, an anonymous person or group using the Twitter moniker Rex Mundi said it had hacked the Genevan cantonal (state) bank's servers and downloaded more than 30,000 emails by Swiss and foreign clients. 
Hours after the hacker's 1700 GMT (12 noon EST) ultimatum expired, the bank issued a statement saying that the intercepted material had been published, but added that it represented "no particular financial risk for clients or the bank".


  1. A lot of interesting points. In particular, the one about multiple, overlapping reporting requirements (especially applicable for expats). For example, in what world should an account that is reported by a QI (and for which the IRS receives 1099) be subject to the FBAR and/or Form 8938 penalties?

  2. As always, the TAS is addressing a lot of important points.

    Fear and complication of optout, as well as legal costs result in many paying unjustified penalties. This is even after th person comes in voluntarily and reports something that the IRS would not have discovered on its own. Furthermore, one taxes and interest have been paid, the person has reimbursed the government for the damage. There was no damage done by not reporting the account, since FBARS are filed away and the information is not used unless the IRS queries the Treasury for FBAR information.

    Contrast this to cases of failing to registedr for the draft during the 1960s and 1970s, during the Vietnam war. Those who failed t register were sent a letter telling them to do so (the equivalentof the IRS sending a Letter 3800 or whatever the number is) and the only prosecutions were those who wrote to the Selective Service or the President saying that they were refusing to register (somewhat equivalent to the mayor of London's public statements.)

    So far the IRS has treated taxpayers in many ways (20%, 25%, 27.5%, 12.5%, 5%, streamlined5%, streamlined 0%, transition to streamlined, etc.) Some happened to hear about foreign reporting a day after the 25% program ended and had to pay 27.5%. Some of the 27.5% participants lucked out because the IRS took years to process them, so they were still eligible to apply for transition.

    I question the contention that once the 906 is final, theres nothing that can be done. In some of the FOIA documents, the question is asked how can the IRS get a cnsent to reopen years for which the SOL has expired, and the answer given is that under contract law the taxpayer and IRS can agree to anything. Thus it seems that they could just as well agree to modify a 906 signed by both parties, IF both parties agree to modify it.

    Should such a proposal come into existence, I believe part of it should be a requirement that the IRS send notice to all 40,000 who entered OVDI, as well as prominently mention this on form 1040. A statemnt such as ¨If you paid a foreign account fine you may have some of the money refunded. See IRS website for details." There, 20 words without legalese. The IRS shouldn't expect people to find out on their own.

    Finally, heartfelt thanks to Nina Olson and everyone at TAS for the multi-year effort.

  3. Regarding residence-based taxation. US states do this; when you move from one state to another you stop paying taxes in the former state and begin paying in your new state of residence. States seem to have no problem ensuring there is compliance (few bogus claims of residing in FL, TX, AK, WA etc.) Even the IRS exempts wages earned abroad up to a certain amount if either the foreign residence or physical presence tests are met. If the IRS can do that, why cant it exempt the same people from all US taxes and FBAR filing requirements?


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