UBS clients in tax probe try to make bank carry the can
by, Nick Mathiason, The Observer
UBS will face more embarrassment over its role in an alleged multibillion-dollar tax evasion scam on behalf of its US clients early next month.
Swiss lawyers attempting to stop UBS handing its clients’ private financial details over to US tax authorities will claim that the bank was exclusively behind an alleged plan to evade taxes. The issue centres on a status known as “qualified intermediary”, which enables financial institutions to assist the wealthy with international income.
This places the responsibility on banks to declare their clients’ tax status. They also have to identify the beneficiaries of overseas bank accounts. But a huge loophole has existed allowing beneficial owners to be corporations. This has enabled lawyers and accountants to create a complicated web of company trusts to conceal the identity of beneficiaries. It was seemingly a technique deployed by UBS bankers to protect its clients’ fortunes.
Andreas Rüd at Rüd Winkler Partner, who is representing a Swiss client of UBS trying to prevent the bank handing over his records, said: “UBS looked for a loophole in the QI regulation and was actively marketing this to existing and new clients, which was perfectly legal at that time under Swiss law.”
Rüd added that UBS “is publicly alleging that its clients lied to UBS when in fact UBS was perfectly aware who the ultimate beneficial owner of the assets was at every point time. It was also UBS who told its US clients to implement a corporate structure.”
UBS said it did not wish to make any comments on a case that was ongoing. It is helping US authorities resolve the case, which one analyst suggested could result in the termination of its banking licence.
The case threatens to end centuries of Swiss banking secrecy. If UBS hands over its client details it could see other countries demand similar information. The Swiss court will hand down its first decision in March.
IRS collections from audits fall in 2008
“The number of reviews of returns filed by individuals increased slightly this year. Those earning less than $200,000 had about a 1 percent chance of being audited. Those with incomes of more than $200,000 had about a 3 percent chance of being examined.
Meanwhile, taxpayers with incomes of more than $1 million had a 5.6 percent chance of being audited, a drop from 6.8 percent the year before.”
Click here for complete article.
IRS to Crack Down on Tax Dodge Sold by UBS, Citigroup
By Ryan J. Donmoyer, bloomberg.net
Dec. 8 (Bloomberg) — The Internal Revenue Service has made a priority of cracking down on derivatives created by banks such as UBS AG and Citigroup Inc. that are designed to help offshore hedge funds avoid a 30 percent dividend tax.
IRS Commissioner Doug Shulman said the tax-collecting agency today designated the derivatives a “Tier 1” issue, requiring auditors to flag the transactions when they encounter them during examinations, examine how they are structured, and report them to the national office to be catalogued.
The agency was criticized in September by the Senate’s Permanent Subcommittee on Investigations for looking the other way while securities firms sold complicated financial products designed to skirt laws requiring them to withhold U.S. taxes on stock dividends paid to offshore investors.
“The tier issue process will provide the needed organizational priority and coordination to ensure taxpayer compliance with the U.S. withholding tax provisions,” Shulman told a conference of tax lawyers in Washington.
The Senate panel’s report said Citigroup, Morgan Stanley, and Deutsche Bank AG also profited by creating and selling “dividend-enhancement” products with no legitimate investment purpose besides enabling investors to avoid taxes.
Morgan Stanley
Morgan Stanley’s dividend-enhancement products generated $25 million of revenue for the company in 2004 alone, and cost the U.S. government more than $300 million in unpaid taxes from 2000 through 2007, the report said.
Separately, Shulman said he intends to expand a program the IRS started with Canada, Australia, Japan, and the U.K. that allows the tax agencies to share information daily about abusive tax shelters as well as the banks, lawyers, and accountants that promote them.
Shulman said he wants to expand the program, known as the Joint International Tax Shelter Information Center “beyond its roots in combating tax shelters” to include broader areas of cooperation. Countries participating currently only exchange information about specific transactions.
“We need to redouble our commitment to international cooperation and explore new and different ways to work with our counterparts overseas,” he said.
Click here for complete article.
U.S. Is Said to Expand Tax Inquiry
By LYNNLEY BROWNING, The New York Times
The Justice Department has expanded its criminal investigation into foreign banks that sell offshore private banking services to include Credit Suisse and HSBC, according to people briefed on the matter.
The investigation into the two European banks is an outgrowth of an inquiry by federal prosecutors and regulators into UBS, the Swiss bank giant, over its sale of offshore banking services to wealthy Americans. Federal prosecutors, who are focusing on senior and midlevel executives and bankers at UBS, contend that UBS illegally helped American clients hide up to $20 billion in secret offshore accounts, thereby evading $300 million a year in taxes from 2000 to 2007.
HSBC, which is based in London and is Europe’s largest bank, is a global financial giant with large retail, private, asset management and investment banking operations across the United States and Asia. Credit Suisse, which is based in Zurich, is also one of the world’s largest private banks, with significant operations in the United States.
The investigation into HSBC and Credit Suisse began about September and is focusing on whether the two banks helped wealthy American clients hide up to $30 billion in offshore accounts that went undeclared to the Internal Revenue Service, the people briefed on the matter said. Prosecutors are examining whether the two banks illegally helped their American clients use those offshore accounts to evade United States taxes and whether the clients themselves violated United States laws.
Click here for complete article.
I.R.S. Debates Way to Deal With Foreign Tax Shelters
New York Times (12/3/08) is reporting the following:
The Internal Revenue Service is debating how to settle tax disputes with scores of wealthy American clients who use offshore private banking services sold by UBS and other foreign banks, according to lawyers who represent those clients.
The unusual discussion, which has reached the highest levels of the agency in recent weeks, centers on the question of the steep penalties — 50 percent annually of the sums parked in each account — typically levied on money hidden offshore. Clients who used undeclared accounts for years can owe the I.R.S. many times what those accounts hold, even before back taxes and interest.
The debate has swelled amid an investigation by the Justice Department into offshore private banking services sold by UBS, the world’s largest private bank, Credit Suisse and HSBC.
Click here for complete article.
-
Subscribe via RSS
Translator
-
BlogRoll
