U.S.-Swiss Tax Deal Throws Scare into Rich Wealthy Americans with
Offshore Accounts on Notice as Way Cleared for U.S. to Find Tax Evaders
*
[244]
(AP) A deal with Switzerland settling U.S. demands for the names of
suspected tax dodgers from a Swiss bank has a lot of wealthy Americans
with offshore accounts nervously running to their tax advisers - and the
Internal Revenue Service.
"They are very frightened," said Richard Boggs, chief executive of
Nationwide Tax Relief, a Los-Angeles-based tax firm that specializes in
clients with tax debts exceeding $100,000. "You have the super rich who
are not used to being pushed around and they are finding themselves in
unfamiliar territory."
The U.S. and Swiss governments announced a court settlement last week
<http://www.cbsnews.com/stories/2009/08/12/business/main5236509.shtml>
in efforts by the IRS <http://www.irs.gov/> to force Zurich-based UBS
AG to turn over the names of some 52,000 Americans believed to be hiding
nearly $15 billion in assets in secret accounts.
Justice Department and UBS lawyers told a federal judge in Miami in a
brief conference call Wednesday they had initialed a final deal. But
they did not disclose any details, such as how many of the 52,000 names
sought by the IRS will be revealed.
Even before the settlement, the high-profile case - coupled with other
U.S. efforts to go after Americans hiding undeclared assets - has scared
hundreds of tax dodgers to turn themselves in. Boggs said his firm has
been taking on 100 new cases a month, a big increase over previous
years.
Peter Zeidenberg, a litigation partner at the law firm DLA Piper in
Washington, said he, too, is he seeing more people with undeclared
assets seeking information about their legal options.
His advice: "I don't think you have much of a choice but to come
forward. ... I think the landscape is permanently changed."
The IRS - the federal tax collection agency - long has had a policy that
certain tax evaders who come forward before they are contacted by the
agency usually can avoid jail time as long as they agree to pay back
taxes, interest and hefty penalties. Drug dealers and money launderers
need not apply. But if the money was earned legally, tax evaders can
usually avoid criminal prosecution.
In March, the IRS began a six-month amnesty program that sweetened the
offer with reduced penalties for people with undeclared assets. IRS
Commissioner Doug Shulman said the response has been unprecedented.
Shulman would not say how many people have applied so far. But the IRS
said 400 people applied to voluntarily disclose undeclared assets in a
single week in July, compared with fewer than 100 applications all last
year.
The amnesty program, which ends Sept. 23, is part of a larger effort by
federal authorities to crack down on international tax evaders.
"Each time someone walks through the door with a disclosure, we get more
information. We get more information about other people. We get more
information about other financial institutions," Shulman said. "If
people have been hiding assets in the past, they should be nervous, and
they should be a lot more suspect about doing it in the future."
The U.S. recently reached agreements with several countries, including
Luxembourg and Switzerland, to share more tax information in the future,
just as the IRS is strengthening its enforcement ranks.
President Barack Obama, in his proposed 2010 budget, asked Congress to
pay for 800 additional agents, examiners and lawyers to go after people
who hide money overseas. Mr. Obama also wants Congress to require
overseas financial institutions doing business in the U.S. to share more
information with the IRS.
Earlier this year, UBS admitted assisting U.S. citizens in evading taxes
as part of a deferred prosecution agreement with the Justice Department.
UBS agreed to disclose the names of about 300 American clients and pay a
$780 million penalty. The IRS subsequently filed its case seeking the
names of 52,000 additional U.S. taxpayers believed to be hiding assets
in UBS accounts.
So far, four UBS customers whose names were given to U.S. authorities
under the prior agreement have made deals to plead guilty to tax charges
in federal court.
"The UBS case, the agreements we are signing, the legislative proposals
and the enforcement efforts are all meant to send one message, which is
that if you owe tax to the U.S., we are going to use every tool we have
available to get that," said Michael Mundaca, acting assistant treasury
secretary.
Sen. Carl Levin, a Michigan Democrat, applauded the administration's
efforts, but said more can be done to catch tax evaders. Levin has
introduced a bill <http://tinyurl.com/oatqdt> that would direct the
treasury secretary to maintain a list of nations that "impede U.S. tax
enforcement" and give him authority to impose financial penalties
against uncooperative countries.
Levin's initial list of 34 countries and other jurisdictions would
include Switzerland, the Cayman Islands, Bermuda, the Bahamas, Hong Kong
and Panama.
"We should have put a clampdown on these tax havens a long time ago," he
said in an interview.
Raymond Baker of Global Financial Integrity, a Washington-based group
that advocates tougher policies against international money laundering,
said he is encouraged by the administration's efforts. But he is not
ready to call it a crackdown.
"As we get past the UBS case, is the momentum for continuing to go after
tax evaders going to be sustained?" Baker said. "I think it's too early
to tell."
It would, however, be risky for a wealthy tax dodger to wait to see if
the government's stepped up efforts continue, said Boggs, the tax
adviser. He said his firm usually recommends a "strategic surrender" to
the IRS.
"We basically are waving a white flag and telling the IRS that we have
every intention of resolving this issue in the mutual best interest of
the government and our client," Boggs said.
"Historically, the best outcomes that we have been able to negotiate
have always involved good faith from the taxpayer," he said. "And good
faith means getting to the IRS before they get to you."
http://www.cbsnews.com/stories/2009/08/15/business/main5244128.shtml
