New York – The days of secret bank accounts are numbered for U.S. taxpayers and European tax dodgers should also watch out after the United States and Swiss bank UBS AG agreed to settle a tax evasion case.
Subscribe to our Daily Roundup Email
Details of the deal were not made public after the settlement was initialled on Wednesday.
But tax experts expect the settlement to involve the disclosure to U.S. tax authorities of thousands of names of U.S. residents suspected of using secret Swiss accounts to conceal assets, albeit without formally breaching Swiss bank secrecy.
“It is clear that U.S. citizens that formally believed they could hide money in Switzerland and other offshore centres will now conclude it is not safe,” said Michael Weinstein, a lawyer at law firm Cole Schotz who is advising UBS clients.
“The deal is going to force individuals to come forward and reveal those secret accounts voluntarily. If not, UBS will.”
UBS has already promised to stop offering offshore accounts to U.S. citizens and is closing down existing undeclared accounts.
Many other Swiss and foreign banks have also already started to kick out U.S. holders of secret accounts or force them to comply, leaving them little room to hide in anticipation of further action by the U.S. Internal Revenue Service.
“For U.S. taxpayers it is going to be impossible to hide money in Switzerland and it is just a matter of time that this is the case also for Germans and Britons,” Asher Rubinstein, a partner at law firm Rubinstein & Rubinstein, said. “Switzerland will no longer be a tax haven.” Tax lawyers say many of UBS’s competitors are sending letters to U.S. clients asking them to transfer their funds to a U.S. tax-compliant entity.
However, some secret account holders, who range from well-travelled businessmen to Jewish families who had fled hostile countries, could not stomach transferring between 40 and 60 percent of their hidden fortunes to U.S. tax authorities.
“For every three to four clients that come here, there are one or two who, when we do the numbers, say: I cannot write a cheque that big. I will take my chances,” Rubinstein said.
EUROPEAN ACTION?
UBS Chief Executive Oswald Gruebel said earlier this month he expects the bank’s tax dispute to prompt action from European governments as well as higher costs for private banks. “Other governments will closely watch what is going on there,” Gruebel told reporters. “It is not a very good development for the wealth management industry. There will be additional costs for compliance, but then, on the other side, one should not help other people to evade taxes.”
European governments have already been fighting tax dodgers and Germany went as far as to pay for client data stolen at Liechtenstein’s biggest bank LGT about a year ago.
The affair triggered massive client withdrawals from the tiny banking secrecy stronghold, which has since agreed to be more tax transparent to save its financial industry. This week, Liechtenstein signed a deal with Britain to to push 5,000 investors in Liechtenstein to disclose accounts.
“It is good that the Swiss government supported the UBS solution, but they have to be aware that there will now also be many similar discussions with other countries,” said Thomas Borer, a former top Swiss diplomat.
But the devil is in the detail and tax transparency advisers said the UBS settlement could disappoint as it will not likely involve any automatic exchange of information.
Switzerland will do away with its artificial distinction between tax evasion and tax fraud, but will not go as far as totally lifting the veil from its clients’ accounts.
“Swiss banks have helped each other to break laws, in the age of globalisation, that has to change,” Raymond Backer, a director at non-profit organisation Global Financial Integrity. “There is no place for Swiss bank secrecy.”
Private banks will have to learn to live in a world where bank secrecy is not a competitive advantage, at least when it comes to U.S. and European citizens.
“Pressure (on Switzerland) has become massive and we are in a phase were countries’ public deficits are very, very high,” Deutsche Bank Chief Executive Josef Ackermann, a Swiss, told a conference last week when asked about the UBS tax issue.
there goes my big $$$$. but i can still take it out and hide it under my pillow
Dont ever trust the swiss any more nut i agree that it was stupid move from anyone holding accounts there there are better ideas.
This is great news. Finally, these thieves will start paying their fair share like the rest of us. If only we could get to working on the welfare (and other socialist program) thieves maybe the middle class wouldn’t have to keep paying more and more and more in taxes.
Thieves? Doesn’t anybody realize that this was the only way we had to get money out of countries that became hostile to us? These accounts literally saved lives of thousands. If you really think that this will somehow lower your taxes, you are quite mistaken. Taxes have NEVER gone down, ANYWHERE. This is an attack on Liberty.
What a shame what happened in america, all is being done in the name of fighting terorisem.
Why is this different than lying about your income so that you can get welfare, food stamps, medicaid etc? Both groups are doing the same – not reporting income to have more money at their disposal. Both are equally wrong in my opinion.
Oh a bruch! I’m lost..
Before WWII, it wasn’t necessicary to put money in Swiss accounts, but we did. Don’t be foolish to assume that “it couldn’t happen here”.
People keep making the same silly mistake assuming that if someone had not payed taxes, that this “stealing”.
If the Government wants someone to pay taxes, it is a Request for Money.
If the Government wants you to pay $100 in taxes, that $100 is your real money. That money does not belong to the Government at all, even according to US Law.
That $100 is Yours and Yours alone, but the Government (because a few individuals voted that way) would like you to Give it to them.
If you don’t give it, it is not “stealing”, although you are not following the Tax Law which is a crime but this crime is a crime like driving on Red Light, which is not stealing, just not following just 1 (small) law.
The Government does not “own” that $100 and therefore your not paying, can’t be considered “stealing” in anyones book.
Even if someone had made a loan and either can not pay it back for good reason (is bankrupt) or because of a bad reason (if he just doesn’t want to), it is not called “stealing”.
Even paying back a loan is an obligation but if you owe loan of $100, that $100 is yours and our not giving it back is not “stealing” rather it’s only an Obligation, both according to the Torah and according to secular law.
In Torah it is referred to as “Prias Baal Chov Mitzvah” it’s a Mitzvah but not doing the Mitzvah is not called “stealing” (although it is certainly wrong).