Results tagged “tax evasion”

We are by now used to hearing rhetoric about "pledges" to end bank secrecy and an end to tax havens, as if forcing another country to change its legal code were a natural course of action.

But what do the so-called tax havens think about all this? Here's an interesting article from Uruguayan newspaper El Pais (Uruguay was one of the 4 countries originally placed on an OECD "blacklist"). The author, respected Uruguayan economist Ignacio De Posadas, makes the case for Uruguay keeping it's bank secrecy law. Now of course he cannot speak for a country of 3 million people, but its revealing nonetheless to hear their story, not often represented in the Western press. The article is written article in Spanish; here are some of his arguments in translation.

- The issue isn't about when people use bank secrecy to commit serious crimes, nobody disputes that.

- Uruguay doesn't have any obligation to enforce the collection of French or British taxes (nor would those countries give them anything in return).

- What right do "powerful" countries have to pressure smaller countries into changing their internal laws - an action which will benefit the more powerful and result in a loss for the smaller country?

- The OECD text says that tax havens should bring themselves in line with "international standards" for tax-information sharing, as if it were a UN convention or some other multilateral agreement signed by Uruguay, when really it's an OECD convention, of which Uruguay is not a member and has nothing to do with.

- Why are they doing this? Because over several decades OECD countries have been expanding and complicating their systems of taxation - out of all proportion with the return these administrations give to taxpayers. In other words - it's their problem. What does Uruguay have to do with it?

- How does bank secrecy benefit Uruguay? In reality the question isn't being put in the right way. Bank secrecy is consecrated in the constitution. Of course there are limits and norms to bank secrecy, but these aren't pre-requisites. In other words..it doesn't matter if it benefits Uruguay or not, it's a right. Full stop.

The war on tax havens is about strong and powerful countries using force to impose themselves on smaller nation states. There are no guns but the principle is the same.

More on bank secrecy.

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.

, Jason Sharman, armed with little more than google and a $10,000 dollar budget, set out to form anonymous companies and offshore bank accounts worldwide - with interesting results (see economist article). Where were the places with the most lenient due diligence requirements?

In his 45 attempts to open anonymous shell companies and secret bank accounts Jason was successful in 17 cases, of which 13 were OECD countries. Britain earned top honours. In 45 minutes Jason was able to form an anonymous bearer -share company without identification, complete with nominee directors and a secretary for just  £515.95 ($753).

But when he tried to open accounts in Switzerland and Bermuda, he was asked for documents like a notarized copy of his birth certificate!!

It just goes to show that high-tax governments aren't interested in where the money's coming from - as long as they get a slice of the pie..

Lets see what theatrics tomorrow brings.

UBS have forced out a top executive who formerly handled secret offshore bank accounts for wealthy Americans. The news comes as US authorities and the Swiss bank continue to lock horns in a tax fraud investigation centering on rich US citizens with undeclared offshore bank accounts.

The man in question, Martin Liechti, was put on paid leave according to a UBS spokesman. It is understood that the two parties are negotiating an exit agreement that might be acceptable to both.

Its not the first time Liechti has been in the news. In May of last year he was taken in for questioning by US authorities as part of their investigation into alledged tax evasion by UBS's US clients.The banker was detained for several months before being released and returning to his native Switzerland, a move which shocked many in the world of swiss offshore banking and beyond. Some Swiss private banks are now barring foreign travel for their top executives fearing similar arrests.

His removal will invite speculation as to how much information he gave the US authorities during his detention, and how much UBS are willing to give, as US pressure to break the legal stalement increases.

Liechti is not the only member of UBS top brass to leave the bank recently. The CEO,  chairman and several private bankers have all resigned or been forced out in the past few months.

Promised changes in Swiss bank secrecy will still not allow the US access to the information that want, according to tax haven expert Raymond Baker of Global Financial Integrity, a Washington-based think tank.

In an interview with swiss media agency swissinfo he maintains that recent decision to adopt OECD standards will not do enough to catch tax evaders.

 ''This announcement is not a significant step because it does not change Swiss laws on banking secrecy. In fact, what the Swiss government said in essence is that if a foreign government knows what it is looking for, the Swiss authorities will cooperate. But the government has given itself lots of leeway for denying requests for information.''

The Swiss for example have only agreed to hand over information in response to requests with specific evidence on a case by case basis. However Baker would rather they also gave in to so called 'fishing expeditions' even if evidence of illegality is unclear. He proposes that the OECD standards should be amended to allow for this:

''It is important that these standards are expanded, in particular to allow governments to request information from Switzerland and other tax havens, even if foreign governments only have reason to believe that funds are deposited there illegally.''

If the OECD model is changed as Baker suggests, the ramifications could be huge, with people worldwide losing the privilege of bank secrecy at the whim of another country or just because they have an offshore account. Baker also called for Switzerland to change its legal code to allow foreign governments easier access to personal data:

''I want Switzerland to end the distinction between tax fraud and tax evasion. This baffling distinction is becoming increasingly untenable. It is obvious that most of the funds deposited in tax havens violate the law. I would like Switzerland to take the lead.''

It's irresponsible and plain wrong to suggest that most funds in tax havens violate the law. Much may depend on whether citizens and governments worldwide are duped into giving up their rights by this type of rhetoric.

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.

The Vatican is expected to demand the closure of all tax havens in its official statement, the encyclical, which is released March 18th. The paper has been long awaited but was postponed last year in order to conduct further research into the reasons for the financial crisis. Last December a Vatican issued policy paper blamed the financial crisis on offshore banking centres such as the channel islands The paper also blamed offshore banking for its contribution to the global deficit, and for its use in transferring money from poverty stricken to rich countries. According to the Vatican, if taxed at source these funds could be much better utilized in helping the citizens of these underdeveloped countries The pope's move coinncides with momentum from developed countries for greater regulation of offshore banking, with Barack Obama in particluar calling for an end to widespread tax evasion by US citizens Obama's campaign has been hurt by allegations of tax avoidance by his nominees. It remains to be seen whether the Pope's squeaky clean image will not likewise be damaged by his lieutenants. It is hard to imagine that that not even a single Cardinal has an offshore company or bank account.

Excerpt from an interesting article posted on the Economix Blog of the NY Times:

Given that the likelihood of being caught is relatively low, says Daniel N. Shaviro, a tax professor at New York University School of Law, most people comply with tax laws because of a "sense of good will, the sense that others are complying and the fairness of the system." The perception of the likelihood of being prosecuted for tax fraud may also be higher than the actual likelihood of being prosecuted, Mr. Shaviro says -- perhaps because the I.R.S. regularly goes after high-profile defendants like Leona Helmsley, who is said to have once proclaimed that "only the little people pay taxes."

Continue reading How Common Is Tax Evasion?