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Thread: update on 'Offshore Investigations' by the IRS ...

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    Default update on 'Offshore Investigations' by the IRS ...

    from

    (snip)"A U.S. tax program encouraging UBS clients to avoid criminal inquiries by declaring offshore accounts before Sept. 23 is prompting a flood of disclosures by customers of Zurich- based Credit Suisse Group AG and Julius Baer Holding AG, LGT Group in Liechtenstein, London-based HSBC Holding Plc, and Bank Leumi Le-Israel Ltd., tax attorneys said.

    That may give the Internal Revenue Service ammunition to target other overseas wealth managers as it seeks to crack down on tax evasion. UBS, the largest Swiss bank, avoided prosecution on Feb. 18 when it admitted helping Americans dodge taxes, paid a $780 million penalty, and disclosed secret data on 250 clients. In August, UBS agreed to reveal another 4,450 clients to settle a U.S. lawsuit seeking more data.

    “It is very possible that the IRS will be able to get strangleholds over the other banks because they’ll have specific information which will permit them to bring specific allegations of wrongdoing before the U.S. courts,” said Robert Fink, an attorney at Kostelanetz & Fink in New York. “This thing may spread like wildfire.”

    The disclosure program and the U.S. lawsuit settled by UBS are helping the U.S. squelch offshore tax evasion by pursuing financial institutions and intermediaries including law firms, IRS Commissioner Doug Shulman said Aug. 19. The U.S. loses $100 billion a year through offshore tax evasion, estimated U.S. Senator Carl Levin, a Michigan Democrat.

    Bahamas, Granada

    Fink, whose firm handled more than 250 disclosures, said his clients told the IRS about accounts at a dozen Swiss banks, as well as banks in Germany, England, Italy, Belgium, Singapore and Hong Kong. Lawrence Horn, an attorney at Sills Cummis & Gross in Newark, New Jersey, said his clients declared accounts at Bank Hapoalim Ltd. in Israel, as well as banks in the Bahamas, Granada and the Cayman Islands.

    After UBS customers, account holders at Zurich-based Credit Suisse are the largest group of people coming forward to the IRS, said Fink and Scott Michel, a lawyer at Caplin & Drysdale in Washington. (snip)

    (snip)"“I have a pretty clear idea that they’ll set their sights on the next level of Swiss banks,” said attorney Robert McKenzie of Arnstein & Lehr in Chicago, which represents 65 clients making disclosures.

    Switzerland, which manages an estimated 27 percent of the world’s privately held offshore wealth, agreed in March to cooperate with foreign authorities on tax-evasion probes to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development.

    The IRS deadline has set off a rush of disclosures, with tax attorneys estimating that more than 3,000 U.S. taxpayers have filed paperwork with the IRS since the program was announced in March. The IRS hasn’t said how many people have applied to file voluntary disclosures.

    “I feel like I work in a bakery where I ask people to take numbers,” Fink said. “I have never seen such a deluge. I was thinking of getting folding chairs in our reception area.”

    Some potential clients have been skittish about revealing their identities to him, with one wearing “massive sunglasses and a red wig which was so artificial that it must have been bought in a five-and-dime store,” Fink said.

    $100 Million

    Fink said most of his clients have offshore assets of $1 million to $5 million, with four exceeding $100 million.

    McKenzie said some of his clients inherited accounts set up by parents or grandparents in other countries. They include political refugees who fled Vietnam and Iran as well as descendants of Holocaust survivors, he said.

    “There was a mentality among direct descendants of Holocaust survivors that you should have a cash hoard somewhere else in case the United States becomes the next fascist enterprise,” he said. "(snip)


    From a personal standpoint, I am all for increased IRS enforcement of US taxes due on offshore earnings. While that may seem counterintuitive, there is actually a ton of real world logic behind it, which revolves around the 'moral hazard' of real world US income tax payments.

    At present, something like 45% lowest income Americans do not actually have to pay income taxes at published tax rates, because various tax credits and deductions cancel out their tax liability ( and in some cases provides a 'gov't handout' check in the form of a 'refund' check for taxes that were never paid ). As such, if the US gov't proposes some new social program / bailout program / expenditure of taxpayers' money, this 45% of Americans has absolutely nothing to lose by supporting such programs / bailouts / expenditures.

    'On paper', something like 2% highest earning Americans are required to pay very high official income tax rates, with the gov't calling for increases in those official tax rates. However, based on what's coming out of the woodwork in regard to UBS and the voluntary disclosures by US holders of undeclared foreign bank / investment accounts, it would appear that in real world terms this top 2% of Americans has been sidestepping a major portion of their tax liabilities under published tax rates via offshore accounts. While those undeclared offshore accounts ( and untaxed foreign earnings) are in existance, this allowed the same sort of 'moral hazard' situation to exist as above ... i.e. if the US gov't proposes some new social program / bailout program / expenditure of taxpayers' money, this 2% of Americans had little to lose by supporting such programs / bailouts / expenditures.

    However, with this major expansion of IRS enforcement re collection of taxes on (previously) undeclared foreign earnings of US citizens, and with the resulting closure of foreign accounts of US citizens by the foreign banks, all of a sudden the 'gap' between the published tax rates applying to the top earning 2% of Americans and the real world tax rates they actually must pay is rapidly narrowing. As this happens, it is likely to create a major paradigm shift in regard to the top earning 2% of Americans supporting gov't programs that will now REALLY increase the amount of taxes they must actually pay ! And unlike the lowest earning 45% of Americans, the top earning 2% of Americans have the means of 'making their voices heard' by politicians and media.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    here's one early example of that paradigm shift I am referring to ...



    (snip)"No one can know exactly what Finn M. W. Caspersen, a prominent philanthropist and the heir to the Beneficial Corporation fortune, was thinking when he decided to take his life on Labor Day. Although Mr. Caspersen, 67, was battling kidney cancer, his suicide shocked his family and friends.

    But Mr. Caspersen, a patron of Harvard and Princeton who gave away tens of millions of dollars to charity, apparently harbored a secret: He was suspected of dodging many millions in federal taxes. The authorities, it seemed, were closing in.

    At the time of his death, investigators were building a case against Mr. Caspersen on suspicion of using secret offshore bank accounts to evade taxes.

    The authorities had asserted he might have owed as much as $100 million in back taxes and fines or, possibly, even have faced prison, according to a person briefed on the investigation, who was granted anonymity because of the delicacy of the case and the events surrounding Mr. Caspersen’s death.

    Whispers of some sort of tax trouble went through the crowd at Mr. Caspersen’s funeral on Tuesday. About 800 people attended the service in Morristown, N.J.

    “He made everything right for so many people, and that is why this is such a tragedy,” Susan Wachter, a friend and former Beneficial board member, said of Mr. Caspersen’s death. "(snip)

    (snip)"Like Mr. Caspersen, his sons are graduates of Harvard Law School, where the Caspersen Room houses rare books, documents and artwork. Last year, Mr. Caspersen pledged $30 million to Harvard Law, the largest single donation in the school’s history. "(snip)

    (snip)"He unexpectedly resigned from the Dean’s Advisory Council at Harvard Law School — he was in the class of 1966 — and quit as chairman of the board of the Peddie School, the prep school in Hightstown, N.J., from which he graduated in 1959.

    He also resigned from the town commission in Jupiter Island, Fla., where he lived, and quietly stepped down as the chairman of the Hodson Trust, a foundation that has awarded $210 million in scholarships and was established by Clarence Hodson, the founder of Beneficial Loan Society, later the Beneficial Corporation"(snip)

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    Taxes kill.

    Switzerland, which manages an estimated 27 percent of the world’s privately held offshore wealth...
    Not anymore I bet. The decline of Switzerland's banking system. And without all that fat cash, I wonder how the state it's self is going to handle things.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    Yes Mel, they'll whine about paying taxes, and they'll lobby their representatives to pay less. The noose is closing on their scams to cheat the system, and that's good for all the regular people who pay their taxes. Let 'em whine.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    Yes Mel, they'll whine about paying taxes, and they'll lobby their representatives to pay less. The noose is closing on their scams to cheat the system, and that's good for all the regular people who pay their taxes
    At last we agree on something LOL !


    The decline of Switzerland's banking system. And without all that fat cash, I wonder how the state it's self is going to handle things
    Agreed that this is going to precipitate similar paradigm shifts in Europe as well as America. The Germans, French and Italians want to stop their citizens from avoiding taxations via Swiss and other offshore secret accounts as well. But I am told that, where Swiss accounts and Europeans are concerned, there is much more involvement by the 'middle class' ... because it is a simple and easily affordable matter for a German or French or Italian to DRIVE to Switzerland a couple of times per year, as compared to the major expense of an American needing to dedicate several days to fly to Switzerland and back.

    But in the final analysis, the 'Uber-Rich' will still avoid taxes. The banking secrecy of Monaco and Dubai remain unchallenged.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    It would appear that a few European leaders are beginning to 'get it' in regard to the potential consequences of actually trying to enforce official tax rates on their own 'uber-rich' ...


    (snip)"“If there is really a desire to criminalize part of the elite in European countries, then it would be a bigger problem for these countries than for Switzerland,” Konrad Hummler said in an interview at the offices of Wegelin & Co. in Zurich. The “majority of European clients were not criminals but just diversifying away from their home country.”

    Swiss banks last week proposed the withholding tax in a bid to fend off the assault on secrecy by the U.S., Germany and France. The Swiss Bankers Association has forwarded the proposal, under which client identities would be known only to the banks, to the government for consideration.

    A withholding tax may prevent probes of the kind that netted former Deutsche Post AG Chief Executive Officer Klaus Zumwinkel, who confessed in January to using a Liechtenstein account to avoid taxes, Hummler said. That came after the German government paid a former employee of LGT Group, the bank owned by Liechtenstein’s ruling family, for bank records.

    “It’s quite an elegant way to try to solve the problem, not only for Switzerland but also for other countries,” said Hummler, who earlier this month told clients to sell U.S. assets or move their money to other banks.

    ‘Unacceptable Halfway House’

    Swiss banks are proposing an “unacceptable halfway house” and leaders of the Group of 20 nations are unlikely to accept it, said John Christensen, a director at the London-based Tax Justice Network.

    “They are inadvertently confirming what everyone knows, which is that banking secrecy is hiding massive tax evasion by European elites,” Christensen said. “The public is pretty damn angry and those who are leading the attack on bank secrecy are in no mood to compromise.”

    The proposed tax on interest, dividends, capital gains and investment income could raise “billions per year” for foreign governments, according to the Swiss Bankers Association, which represents most Swiss institutions, including UBS AG and Credit Suisse Group AG. That may appeal to European governments, said Hummler, who first advocated a withholding tax in 2001.

    “Do they want to see cash, or are they ideologists who just want to be right?” he said. “Looking at their treasuries, I have the feeling that the cash argument is a good one.” "(snip)

    (snip)"Switzerland, which manages an estimated 27 percent of the world’s privately held offshore wealth, agreed in March to cooperate with foreign authorities on tax evasion probes to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. The withholding tax may only apply to countries with double-taxation treaties with the Alpine nation. More than a dozen are being renegotiated.

    The current debate on secrecy and the unpredictability of taxes imposed by governments is luring some rich people to move to Switzerland, costing their home countries tax revenue, Hummler said. A withholding tax would prompt some customers to leave in search of tax havens, he said.

    “This is a small disadvantage because there won’t be any criminalization of our old clients, this is the most important issue,” said Hummler, who is president of the Swiss Private Bankers Association, which counts Pictet & Cie. and Lombard Odier & Cie. as members.

    Unlimited Partnership

    St. Gallen-based Wegelin, founded in 1741, increased client assets under management by 20 percent in the first half to 24 billion francs, Hummler said. That includes more than 2 billion francs of net new money.

    Wegelin advised clients to sell U.S. assets because it is an unlimited partnership and can’t afford the risk of increased liabilities at time when American tax authorities are cracking down on international banks, Hummler said.

    The U.S. has proposed increasing reporting and oversight requirements for so-called qualified intermediaries -- foreign banks that withhold taxes on behalf of the Internal Revenue Service. At the same time, new rules may force the heirs of those who invest in the U.S. to pay estate taxes.

    “Every decision has an impact on our personal wealth,” he said. “We have an upside and a downside risk. This is very different from managers of other banks who have asymmetric risk, they have bonuses, and on the downside, nothing.”

    The IRS may not be considering its own downside risk as it imposes the new tax rules, Hummler said.

    “I have the feeling that the IRS is only calculating its revenue,” he said. “They are not calculating on the right hand side of the balance sheet what they have to pay for the debt.” "(snip)


    from

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    Switzerland is a beautiful country, except for their evasion-friendly banking system. It's gonna hurt their economy. Because they just dont sell that many cuckoo clocks, cameras, and watches anymore.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    ^^^ yes but they are effectively sending a message to 'uber-rich' brits, french, germans, italians etc. that their relocation to Switzerland would be welcome ... and stating that when compared to proposed 50% 'official' EU income tax rates that might actually be enforced, relocating to switzerland could save them a huge amount of money in future tax liabilities as well. Having that sort of a 'capital' injection enter Switzerland would offset a whole bunch of cukkoo clocks !

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    I would love to spend time there, but traditionally the Swiss have not welcomed permanent immigrants. But money still talks to them loudly.
    Last edited by threlayer; 09-25-2009 at 07:08 PM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    it now appears that the IRS is instituting a 'full court press' on the untaxed offshore accounts of rich Americans ... note the expansion of existing offshore IRS offices and the opening of new offices in Australia, Panama and China.

    (snip)"Oct. 14 (Bloomberg) -- More than 7,500 U.S. taxpayers voluntarily disclosed secret offshore accounts to the Internal Revenue Service as the agency expands its crackdown on overseas tax evasion, IRS Commissioner Doug Shulman said.

    People who have come forward have provided information about accounts holding from $10,000 to $100 million since the IRS extended a Sept. 23 deadline for participating in the voluntary-disclosure program, Shulman said. The partial amnesty ends tomorrow and won’t be extended a second time, he said.

    Americans with undeclared offshore accounts have been under growing pressure since Switzerland agreed Aug. 19 to hand over data to the U.S. on as many as 4,450 UBS AG accounts to settle a lawsuit in which the U.S. had sought as many as 52,000 accounts.

    “We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers skirt their obligations, Shulman said on a conference call. “This entire effort is not just about UBS and a single country.”

    It isn’t yet known how much overlap might exist between the 4,500 names that UBS will eventually provide and the 7,500 people who have come forward to the IRS, Shulman said.

    The IRS will open offices in Beijing, Panama City and Sydney in connection with the probe, which has revealed accounts held in 70 countries and every continent except Antarctica, he said. The agency also intends to hire more than 800 new employees in the next year and add staff to eight existing overseas offices, including Hong Kong and Barbados. "(snip)

    from


    Just imagine the possibilities if 'rich' Americans were actually forced to pay taxes at anywhere near the official 'published' IRS tax rates !!!

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    Uncle Sam says "Hum me hungry - need more money for big appetite."

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    ^^^ absolutely true. However, this introduces a major unintended consequence. It is arguable that a large number of high earning Americans supported a 'new' gov't who announced that their policy would include 'official' tax increases on those earning $250k or more per year. However, this support was based on the historical belief that via various real world options the actual amount of taxes they would really have to pay would be far below the 'official' tax rates. One major option was of course the shuffling of money to unreported offshore accounts, where interest and dividend earnings stemming from that offshore money remained unreported and untaxed by the US gov't.

    Obviously, this MAJOR new offshore enforcement effort by the IRS which will span many countries and many offshore banking / brokerage / investment firms is likely to slam the door on future use of such unreported offshore accounts - which in turn will result in those 'rich' Americans REALLY having to pay a significantly higher de-facto income tax rate. Obviously this will result in increased US tax revenues, at least in the short term. However, a major unintended consequence is likely to be that 'rich' Americans will finally take future 'official' US gov't tax policy seriously - since for the first time 'rich' Americans will now actually have to pay more in taxes when 'official' tax rates are increased !

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    ^^^ Hollywood elites (Nick Cage anyone?) will be appalled they actually have to pay for the programs they crow on about.

    The country is broke man, they will be fishing around in everybody's sofa cushions for change.

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    Default Re: update on 'Offshore Investigations' by the IRS ...

    ^^^ Hollywood elites (Nick Cage anyone?) will be appalled they actually have to pay for the programs they crow on about.
    In reality, this probably still won't be the case. I would imagine that if access to offshore tax havens is really cut off, Nicholas Cage et al will become big buyers of California tax free muni bonds, partnerships in 'production tax credit' producing alternative fuel / wind / solar businesses etc. In this way, even if the federal, state and local gov'ts can't get their hands on all of the tax revenue, at least the gov't can 'dictate' where the American uber-rich must invest a significant portion of their money if they want to 'keep' most of it.

    And obviously the point should not be lost that such a development will lead to classic third world demographics i.e. the very rich, the dependent poor, and the government (with the 'middle class' being taxed to the point of also becoming 'poor'). As you mentioned in another thread, Michigan is already showing signs of this ...

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