Showcase: Fellow IPG Firm
Tax Evasion: The United States and United Kingdom take a different approach to dealing with Switzerland
As members of International Practice Group (IPG), we are pleased to feature other professional advisers and prospective IPG members. This month we turn to our associate law firm in New York, Golenbock Eiseman Assor Bell & Peskoe, whose Ian Shane shares his wisdom on cross-border tax evasion. |
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Switzerland’s second largest bank, Credit Suisse AG, announced on 7th November that the Swiss government had instructed it to hand over certain information on undeclared bank accounts held by US taxpayers; a move that represents the latest battle in the United States’ war on Switzerland's bank secrecy laws. This latest US blast against Switzerland highlights the vastly different approach to combating Switzerland’s role in international tax evasion taken by the US compared to the battle plan being used by a number of European countries.
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On 6th October, UK and Swiss officials signed a new bilateral agreement that will require Swiss banks and other financial institutions to impose a withholding tax on income earned from assets held by UK clients, with the proceeds going to HM Revenue & Customs. A similar agreement was entered into by Switzerland and Germany on 21st September. In exchange for the withholding tax payments, both agreements generally permit the UK and German clients of Swiss banks to keep their accounts hidden from their national tax inspectors; an unthinkable result for the US Department of Justice (DoJ), which is currently undertaking as many as eight grand jury investigations into various non-US banks in connection with offshore tax evasion.
A federal indictment and prosecution in 2008 against UBS, Switzerland's largest bank, resulted in the handover of details on more than 4,000 accounts held by US taxpayers, as well as payment of a $780 million fine under the threat of UBS having its operating license in the United States revoked. A number of former US clients of UBS have subsequently been indicted by the DoJ for illegally hiding assets in Swiss accounts.
In contrast, the German and UK tax authorities have gleaned most of their information on the secret accounts held by their nationals in Swiss banks from client information stolen, and subsequently disclosed, by ex-bank employees. Credit Suisse announced on 19th September that it had reached an agreement with prosecutors in Dusseldorf, Germany, under which it will make a payment of €150 million in exchange for the German authorities dropping an investigation of the bank's employees suspected of helping German clients evade tax. This is an approach that the US will not be taking any time soon, as the IRS gears up for the introduction of the Foreign Account Tax Compliance Act on 1st January 2014, which will force foreign banks to hand over information on their US clients to the IRS. |
