Thursday, March 20, 2014

Around the Net on Offshore Accounts While Otherwise Unproductive (3/20/14)

This will aggregate some of the information I  picked up today in my automated Google searches of the web.

Item #1

A PR Newswire loudly [loudly is my web euphemism for hyperbolically] announced the following:  New Website to Assist Millions of Taxpayers with Undisclosed, Offshore Accounts (3/20/14), here.  I think this is an advertisement to attract those alleged millions and their resources to his coffers.  (I hope he has a good database and staff skills to handle the influx.)  The announcement includes the following:
For those US taxpayers in this precarious position they need expert advice and decisive action to pre-empt imposition of civil tax fraud and criminal tax evasion civil and criminal penalties, which may include: wire fraud, mail fraud, money laundering, failure to file FBAR forms (now known as FinCen Form 1114). Total penalties may be millions of dollars with jail sentences imposed for a maximum of over 80 years for all tax-related felonies.
This is, of course, fear mongering.  The real world is different.  Check out the spreadsheet here which indicates far less -- even minuscule sentences -- in the real world compared to this promo piece.  That does not mean that taxpayer do not face substantial downsides from the behavior, of course.

Item #2

A Wall Street Journal article addresses the expat  issue:  Nearly One-Third of Expats Confused by U.S. Tax Filing Requirements, here.

I don't subscribe to the WSJ because it is a business iteration of Fox News Network (which I like because of the blondes but I won't pay for that anymore because of the WSJ/blonde biases do not match my biases).  So, if you want to read that article, you will have to be a subscriber.  But, if I can speculate about the contents, are they really saying the 2/3's + of expats are not confused and that, therefore, they commit tax fraud when they don't report foreign income (including financial account income) and file FBARs.  WSJ being a Republican rag, I doubt that they intended to infer that because, I suspect, that data set includes a significant number in the "base" to which WSJ pitches its goods.  Really, what they might want to rag on is the IRS and Obama as being responsible for anything inappropriate by anybody anywhere, including expats.

Item #3

John Letzing, U.S. Lawmakers Highlight Swiss Disconnect (WSJ Moneybeat 3/19/14), here, which apparently can be tapped into without a WSJ subscription.  This is pretty good (pretty is a bit of a fuzz word), so rather than summarize, I quote a large block:
The dozens of Swiss bankers and advisers indicted so far in the U.S. for allegedly aiding American tax evasion, who haven’t responded to the charges, do suffer from limitations on their travel abroad. They also risk damage to their professional reputation. But they’re not prevented from pursuing professional interests and living “openly in Switzerland,” as the senators put it with some distaste on Tuesday. And there isn’t necessarily a reason they should be, because they aren’t accused of doing anything wrong here. 
Take Emanuele Agustoni, for example. The one-time Credit SuisseCSGN.VX +1.46% banker was indicted alongside a handful of others tied to the Zurich-based bank in 2011, for allegedly helping American clients evade taxes. Mr. Agustoni hasn’t formally responded to the charges, but his legal status didn’t prevent him from being granted approval from the Securities and Exchange Commission last November to become a registered investment adviser in the U.S. Mr. Agustoni disclosed the indictment in his SEC application, according to public filings.
Mr. Agustoni was also not prevented from winning reelection last month as president of the audit commission in Urdorf, a small town near Zurich. The commission keeps tabs on the town’s finances and reviews investments such as public swimming pools. Mr. Agustoni runs an asset management firm called Golden Eagle Services in a Zurich suburb. 
Andreas Bachmann, another former Credit Suisse banker who was indicted alongside Mr. Agustoni about three years ago, has been running asset management firm EVT Partners in Zurich. Mr. Bachmann pleaded guilty last week in a Virginia court to helping Americans hide money in Switzerland. He was released on bond and is allowed to travel back to Switzerland. Mr. Bachmann could not be reached for comment. 
Raoul Weil, the former top UBSUBSN.VX +1.99% executive indicted for allegedly aiding tax evasion in 2008 and expected to go on trial in Florida in October, was serving as CEO of asset management firm Reuss Private Group in a Zurich suburb until he was arrested in Italy last October and subsequently extradited to the U.S. Mr. Weil’s U.S.-based attorney has said he expects Mr. Weil to be “fully vindicated.” 
There is an extradition treaty between the U.S. and Switzerland, but Swiss officials aren’t obligated to honor extradition requests related to U.S. tax evasion. Indicted bankers here are therefore advised by their attorneys to not go abroad, or risk being ensnared by authorities in a country more inclined to extradite them. Mr. Weil, for example, was arrested during a vacation in Italy. His decision to go abroad left many in the Zurich financial center confused. However, a certain sense of detachment is understandable: People familiar with the matter say the indicted here in Switzerland only become aware of the charges against them after they’ve read about them in the news, and have seen copies of their indictments posted online. 
Of course, as recent events show, the jury may be still out on Bachmann.  See Credit Suisse Banker Pleads Guilty to Tax Conspiracy (Federal Tax Crimes Blog 3/12/14; 3/13/14), here.

Item #4

Finally, this item that if  pretty good people who follow this area without too many confirmation biases:  Jeffrey Benzing, Tax Investigations More Extensive Than Appear, DOJ's Keneally Says (Main Justice 3/19/14), here.  Actually this is the best of the lot (an assessment consistent with my confirmation biases.)  I won't attempt to summarize it, because I highly recommend that readers read the actual blog entry, and do as much of a reality check as their confirmation biases allow.

I really think I can be more useful to humanity by spending less time on these snippet items that I throw out without adequate deliberation.  I will try to behave in the future.


  1. uscitizenshipnightmareMarch 21, 2014 at 3:47 AM

    Have to admit, a bit harsh on both the WSJ and expats. The article is actually from a press release by H&R Block and seems to go only to the filing obligation and not to the full complexity of what needs to be filed. A more detailed survey would show that very few expats understand the full extent of US tax law, whether it be the functional currency rules, the FBAR requirements, form 8938 requirements, the rules around foreign trusts (including form 3520), PFICs, and the myriad other tax traps that exist for US persons residing abroad. To be honest, I think it is a bit unfair to suggest that most expats are even remotely guilty of civil fraud, tax evasion or any other bad tax act. Indeed, the IRS's own report from the late 90's suggests that very few expats actually owe any tax ( Penalties, however, well, much to the IRS's delight, there's money in them thar hills. Not enough to put a dent in the tax gap but more than enough to suggest they are going after rich expats who apparently live tax free in exotic locations. Which is a great narrative, albeit as fictional as the assertion that civil penalties (especially for expats) are about compliance and not revenue generation.

  2. Thanks Jack for acknowledging that we "All" including you, may have confirmation bias. LOL..

    There is so much wrong with our current income tax system, and how it is administered by the "enforcers" you just have to think there is a better way somehow to raise adequate revenues for the reasonable needs of government.

    However, given our borrow and spend ways and our every increasing entitlement regime, it is hard to see what it is.

    So, we continue down the road of more and more 'drag net' style collection methods, relying on more and more on coercive and repressive methods. 'Auto' tax collection or 'auto exchange' of data becomes the new euphemism for the end of a voluntary tax compliance system. Voluntary is receding into mythology. . Where will it end, and what is the end game? FATCA and its evolution to GATCA does not present any encouraging signs, imho.

  3. I'm also guessing that, since it was H&R block that did the survey, they were surveying US expats that were already in the 'tax reporting' system - ie knew they had to file tax returns. I'm guessing this is a small subset of ALL US expats, most of which probably have no idea they even have to file US tax returns.
    From my un-scientific survey, which consists of asking any US expat I meet if they knew that they are required to file US tax returns while living overseas, I have found only one person out of around 20 in the past two years who were aware of their filing requirements.

  4. A U.S. Senate investigative panel is examining Caterpillar Inc. (CAT) and whether the company improperly avoided U.S. taxes by moving profits outside the country, said
    three people familiar with the inquiry.

    The Senate’s Permanent Subcommittee on Investigations will hold a hearing in early April, said two of the people. They spoke on condition of anonymity before an official announcement.
    Rachel Potts, a spokeswoman for Caterpillar, declined to comment. Two staff members for the subcommittee declined to comment.

    In 2009, Daniel Schlicksup, an employee who had worked on tax strategy, alleged in a lawsuit in federal court that Caterpillar used a “Swiss structure” to shift profits to
    offshore companies and avoid more than $2 billion in U.S. taxes. He also alleged that Caterpillar used a “Bermuda structure” involving shell companies to return profits to the U.S. without paying required taxes.

    According to Schlicksup’s complaint, the Swiss structure involved “many shell corporations with no business operations,” in which the management of profitable businesses
    was technically shifted to Switzerland while actually remaining in the U.S.

    Lawsuit Settled

    Schlicksup’s lawsuit, which alleged that Caterpillar executives retaliated against him, was settled in 2012, according to court filings. The company denied the allegations,
    which Bloomberg News first reported in 2011.

    The Senate subcommittee, led by Democrat Carl Levin of Michigan, has been examining tax avoidance by multinational companies. Microsoft Corp., Hewlett-Packard Co. and Apple Inc.
    have been the subjects of previous hearings by the panel.

    The 2013 investigation into Apple uncovered a subsidiary that earned $30 billion over four years with no home for tax purposes.

    The subcommittee also has investigated Swiss banks such as Credit Suisse Group AG for aiding tax evasion by wealthy Americans.

    In 2013, Caterpillar, based in Peoria, Illinois, reported earning 62.2 percent of its pretax income outside the U.S. The company, which had $55.7 billion in revenue in 2013, is the
    largest maker of construction and mining equipment.

    Deferring Taxes

    The U.S. has the industrialized world’s highest corporate tax rate at 35 percent, giving companies an incentive to book profits overseas. Companies based in the U.S. can defer U.S. taxes on their foreign income until they bring profits home.

    As of Dec. 31, Caterpillar had $17 billion in accumulated overseas profits that haven’t been taxed by the U.S., up from $11 billion three years earlier. The largest U.S. companies have
    accumulated $1.95 trillion outside the country, up $206 billion from last year, according to a Bloomberg News analysis.

    Caterpillar said in a securities filing last month that it has received notices from the Internal Revenue Service saying that it owes more in federal taxes.

    “We disagree with these proposed adjustments, and to the extent that adjustments are assessed upon completion of the field examination relating to these matters, we would vigorously contest the adjustments in appeals,” Caterpillar said in the filing.


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.