Results tagged “bank secrecy”

Argentina signed an agreement with the Bahamas Thursday to share banking information as the country tries to tighten the noose on Argentines with cash hidden in overseas tax havens. Similar agreements were recently signed with Costa Rica, Andorra and Monaco. The deals are designed to stop tax evasion and fraud by exchanging tax information, lifting banking secrecy and allowing agents to conduct investigations overseas.

Continue reading: Argentina, Bahamas Sign Banking Information Agreement

Bermuda Signs Tax Agreement with Belgium

Bermuda has reached an agreement with Belgium to exchange information about criminal and civil tax matters. Benefits for the island from this tax information exchange agreement (TIEA) is a commitment by Belgium to conclude a series of mini double taxation agreements.

Continue reading: Bermuda Signs Tax Agreement with Belgium

Swiss private bankers will in future insist that their clients are tax compliant, if remarks made by banking heads at a private banking conference in Zurich are anything to go by.

According to some estimates, Switzerland holds around a third of the $7 million believed to be held in offshore accounts worldwide. In addition to a reputation for reliable banking services, Switzerland's strict bank secrecy is what has compelled so many to open offshore bank accounts in the country.

But attacks on Swiss bank UBS, double-taxation treaties with other european countries like France, and reinterpretations of the line between tax evasion and tax fraud, mean that top swiss private banks are reconsidering the way they do business.

Pierre de Weck, head of Deutche bank private wealth management, indicated that his banks efforts would increasingly focus onshore, saying, "Cross-border onshore accounts will become much more important in the years ahead."

Exactly how the cross-border onshore account will differ from the offshore account I guess we will see, but that the accounts should be 100% tax compliant seemed to be most important.

The heads of Credit Suisse and Julius Baer, two of Switzerland's largest banks that also have offshore operations were indicating the same thing in as many words. ''"Banking secrecy will continue to exist, but not for tax reasons. Private banks will have to offer services on a fully compliant basis.", said Boris Collardi, chief executive of Julius Baer.

Yet separately, private banks which limit their operations to within Swiss borders have been praised for their efforts to maintain bank secrecy. Unlike the global private banks mentioned above, Switzerland's oldest bank, Wegelin has indicated it will no longer accept US clients, in order to preserve bank secrecy even in tax cases.

Source: Wealth Bulletin

The Obama administration is unveiling a new set of measures aimed at ending the use of tax havens and offshore banking centers by US corporations for tax avoidance purposes. It is expected that not only multinationals but also a large number of wealthy families and individuals that use corporate structures will be affected.

The administration is looking to change a tax-saving technique known as "deferral", which allows large multinational corporations to defer paying tax on overseas earnings until the funds are repatriated. The proposed legislation would seek to limit tax deductions that companies could earn from this and is expected to raise $60.1bn over the next 10 years.

In addition they are seeking to overhaul "check-the-box" rules which allow US companies to choose where their subsidiaries are taxed - often low-tax offshore havens with strict bank secrecy that gladly welcome the capital. The administration hopes to raised $86.5bn through this measure.

Personal account holders are also being targeted. New rules would make it harder for Americans to open offshore bank accounts for tax purposes. They would increase reporting requirements and penalties, and make it harder for offshore account holders to win their cases in court. Authorities expect to claw back just $9bn from this measure over the same period.

While many welcome the administration's moves against tax haven use by "big business", especially considering ruthless IRS rhetoric against personal tax avoidance, others are wondering if there will ever be a limit to government tax collection. As "tax haven loopholes" are closed down one by one, individuals and corporations are forced to take part in the economy of the government's choosing. And with the burden of proof shifted away from the accuser to the accused, we may find ourselves once again sliding backwards into a medieval system of taxation.

Liechtenstein and Andorra have agreed to relax their bank secrecy rules in response to global pressure against tax havens.

The two countries are both on a blacklist of uncooperative offshore financial centres drawn up by the OECD, which also includes Monaco.

Liechtenstein is under particular pressure from Germany and the US, who say the tax haven is aiding their citizens to evade taxes under the current bank secrecy laws. The principality agreed today to comply with international OECD standards for tax transparency, in the hope that this will avert some of the pressure facing them. The principality expects that they will not be the only one to cooperate:
 
"I'm quite sure Switzerland will take similar steps in the near future," Crown Prince Alois von und zu Liechtenstein said.

They must be riding on this assumption because if Switerland stands firm they will leave Liechtenstein out in the cold.

Luckily for the Prince Andorra also 'came out' today, promising to pass a law by November that will improve its transparency and get it removed from the OECD blacklist.

A G20 meeting scheduled for April is likely to result in a new blacklist which may or may not include Switzerland. Until now it has resisted international pressure to be more transparent, while smaller tax havens have not been lucky. Switzerland, Austria and Luxembourg are said to be collaborating in finding ways to keep their bank secrecy intact.

The Swiss finance Minister has said that she will comment on Liechtenstein's recent declaration 'shortly'.

The IRS is working out revised rules for its Qualified Intermediary program, which allows the U.S government to keep track of American money abroad.

As Senior IRS lawyer said the US was working in tandem with other high-tax Governments to round up tax evaders with accounts in offshore tax havens.

"We are concerned about U.S. people hiding their assets and not reporting their correct worldwide income," said Steven Musher, IRS associate chief counsel for international issues.

A date was not given for the release of the revised QI rules, but Musher suggested they may not be overly oppressive in order to allow banks some legroom, "We are trying to achieve the balance between increasing the reliability and quality of documentation to serve these various competing purposes," he said.

The IRS is keeping quiet on its latest action against UBS, with senior UBS officer Mark Branson to face a  U.S. Senate Permanent Subcommittee today.

Swiss offshore banking could the one to face the brunt of the tax haven crackdown with politicians unlikely to remain aloof from the media and public opinion.

A US Senate bill proposing intensified action against offshore centers is to be introduced within the next week, according to Senate aides.

Demands for further crackdowns against tax havens and tax avoidance schemes are expected in the bill, led by Senator Carl Levin, which builds on legislation introduced last year along with Barack Obama. The House of Representatives is to follow suit with similar measures.

Proposed action to be taken will include:

- Expanding tax reporting requirements for 'passive' foreign investment vehicles.
- The closing of a loophole that allows US citizens to avoid taxes on US stock dividends offshore
- The classification of US-controlled offshore corporations as domestic for tax purposes.
- Giving Federal prosecutors an easier ride by shifting the burden of proof over legality on to the owners or controllers of offshore structures.

"Offshore tax haven and tax shelter abuses are undermining the integrity of our tax system," said Levin in a statement (reuters). "We cannot tolerate $100 billion in offshore tax abuses burning a hole through our budget each year.

"We can fight back against secrecy jurisdictions and shut down offshore tax abuses if we have the political will."

Switzerland and the Cayman Islands are thought to be the ones on the receiving end of this latest assault. However the legislation is not likely to see a smooth passage through both houses, with many legislators in receipt of campaign funds from corporations with a vested interest in keeping loopholes open.

At a Tax Council Policy Institute conference the IRS 'comissar' Douglas Shulman has reiterated his desire to target individuals and companies with secret offshore bank accounts,

''Clearly there have been some high profile cases in the
news recently. We have been steadily increasing pressure on
offshore financial institutions that facilitate concealment of
taxable income in the U.S...That pressure will continue under my watch,"

Although he would not comment on the UBS case, Mr.Shulman urged US citizens with offshore bank accounts to utilize the IRS's Voluntary Disclosure Program and thereby 'most of the time' avoid criminal prosecution or worse.

Despite already reaching a first settlement with UBS, the US goverment is now suing the Swiss Bank to reveal even more offshore account holders, clearly not satisfied with its current share of the estimated 52,000 American offshore accounts held at the bank.
 
It is not clear whether the IRS really hopes to get them all or if they are just using the threat of litigation on such a giant scale to encourage US clients at UBS (and offshore account holders worldwide) to start reporting.

Shulman said US authorities were scoping out "a wide range
of options to address offshore tax abuses," without going into further details.

It is thought that possible measures could include economic sanctions against tax haven countries, given that many are highly dependent on high-tax countries for their own livelihood.

UBS for its part has sworn to fight back against these latest charges.

European Leaders have engaged in yet more sabre rattling over offshore banking, with a seven-point plan agreed in Berlin calling for ''sanctions'' against ''uncooperative jursidictions''.
At a meeting of G20 Nations the European representatives pledged to end tax havens by applying uniform rules to the worldwide financial markets.

French President Nicholas Sarkozy affirmed that he wanted to ''put a stop to tax havens''. Furthermore he unveiled plans for the next G20 summit in April to ''overhaul the system'', with sanctions to reign in non compliers.

It remains to be seen whether other nations in the G20 group including Brazil, India and China will be as enthusiastic as the Europeans in this latest crusade.

For some this latest bout of verbal swordplay is just a way of sidestepping the main issue at hand: mismanagement of the global financial crisis. Frederick Erixon, director of the European Centre for International Political Economy reckoned the antics were little more than finger pointing.

"They are pointing the finger at tax havens but the problems we're having in the financial system have very little to do with tax havens..They couldn't agree on something more substantial so they went for the easy targets: tax havens and hedge funds. It's all a smokescreen."

The British delegates must certainly have felt like fat kids caught with their finger in the pie since is former British colonies (and some still under direct control) which are hoarding the vast majority of offshore monies.

UK chancellor of the Exchequer Alistair Darling held hands with German Chancellor Angela Merkel in calling for the  Swiss government stop allowing foreigners to hide their wealth and avoid tax, yet made little mention of tax havens linked to the British.

"If it wants to be part of the international community, it's got to be open," Darling was quoted as saying.

With each government going for its own slice of the pie and personal 'most wanted' list, it may be hard for a group with such disperse motives to reach a meaningful agreement any time soon.

Swiss banking secrecy has come under fire recently because of the media focus on UBS, Credit Suisse and their US clients. With the volume of news dedicated to the subject you could be forgiven for thinking that bank secrecy in Switzerland is a thing of the past, that Switzerland has handed over the keys to the castle, defeated.

Most media would like to suggest that some great development has occurred and their output reflects this, but if you take a second look you will find that relatively little has actually happened.

The IRS has been campaigning since last July to prize open details of US account holders at UBS and what has it got to show for it? Out of a suspected 52,000, just 12 names have been promised them. Even these 12 aren't for sure, because they still have the right to appeal the decision under Swiss law.

Of course its in the interest of the US government to keep this issue in the news because it gets people scared about using offshore accounts, and may even result in some UBS account holders handing themselves over . Tax Lawyers too have a field day letting it be known that they are the only solution for these luckless UBS types. Bu is it not just a case of smoke and mirrors concealing the fact that, despite everything, Swiss bank secrecy hasn't changed, and violation of the law still carries a prison sentence?

UBS and Credit Suisse have made themselves targets by opening offices in the US and therefore making themselves subject to US law. The Swiss Federal Council simply
acknowledged that when it agreed to allow the US Customer information to be
given to the IRS. For those banks without a US presence there has been no operational change - Switzerland will still put people in jail for violating bank secrecy.

In fact private banks and trust companies have been reminded by authorities that they will be prosecuted if they violate the Secrecy Act.

It is no more in Switzerland's interest to start unraveling client confidentiality than it is in the interests of those American UBS clients to have their personal details revealed. Although it may have to walk a fine line in order to keep the US from swallowing it whole, bank secrecy remains intact and there are no plans to change it.

Investors looking to avoid the EU Savings Tax Directive by moving to Singapore may have pulled the short straw. Under pressure from OECD countries over its impressive bank secrecy, Singapore has looked to buckle up with its senior finance minister denying that it is a tax haven, and encouraging further OECD cooperation.

The mininster for Finance and Transport Lim Hwee Hua has said that although the Republic has low taxes, it has a strong rule of law and is looking to adopt the Organisation of Economic Cooperation and Development (OECD) standard for transparency and effective exchange of tax information.

'We will be engaging the OECD and the industry to study this OECD standard with a view to endorsing it,' said Lim.

This news may frighten many investors who have invested in Singapore offshore banking following the introduction of the EU Savings Tax Directive in 2005. It requires countries that are signatories to either deduct withholding tax at source or disclose details of foreign depositors to their home jurisdictions.

The directive caused many investors to flee out of havens that were affected by the measure such as the Channel Islands, Switzerland and the Cayman Islands to farther fields such as Honk Kong and Singapore.

Singapore saw a huge expansion of its wealth management business due to its perceived independence from the EU. Total assets in the Singaporean banking system grew from $150 billion in 1998 to $1.173 trillion by the end of 2007 reports citynewswire.

Countries which have agreed to comply with the EU directive are Andorra, Anguilla, Aruba, Austria, Belgium, British Virgin Islands, Cayman Islands, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Isle of Man, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Monaco, Montserrat, Netherlands, Netherlands Antilles, Poland, Portugal, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turks and Caicos, the UK - but up until now, not Singapore or Hong Kong. See OECD website for recent bilateral tax agreements

Both are huge banking centers in their own right and attractive to foreign investors - but for how long?

Liechtenstein's ultra secret bank secrecy has come under renewed attack from the EU.
It was a hard nut to crack. Eventually Liechtenstein's bank secrecy was broken by a rogue bank employee paid handsomely by the German government. But now the EU's blood is up it wants its pound of flesh in the form of new information exchange agreements.
What's in store for Liechtenstein's secretive offshore banking?