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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