US Senates accuse UBS of aiding massive tax evasion
A US Senate subcommittee is accusing the Swiss bank and Liechtenstein's LGT of helping wealthy Americans commit tax fraud.17 July 2008
GENEVA - A US Senate subcommittee accused banks in Switzerland and Liechtenstein of helping wealthy Americans commit massive tax evasion, and urged the establishment of tougher laws to combat offshore tax havens around the world.
In a report released late Wednesday, the Senate subcommittee on investigations estimated that offshore abuses were costing US taxpayers about USD 100 billion (CHF 101.7 billion) a year.
It recommended a range of reforms to snuff out tax cheats, including more stringent US requirements for foreign banks and harsher penalties for financial institutions failing to provide the Internal Revenue Service with details on all accounts their American clients are holding.
"Tax havens are engaged in economic warfare against the United States and the honest, hardworking American taxpayer is losing," said Sen. Carl Levin, chairman of the US Senate Committee on Homeland Security and Governmental Affairs' Permanent Subcommittee on Investigations.
"The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States," the Michigan Democrat said. "Congress needs to enact strong penalties on tax haven banks that help US taxpayers avoid paying taxes to Uncle Sam."
The panel's ranking Republican agreed.
"It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars from taxation, forcing working families to shoulder the burden," Sen. Norm Coleman of Minnesota said, adding that foreign banks were "exploiting gaping loopholes" in US law to act as "Al Capone safe houses for evading taxes".
A Senate subcommittee hearing will be held Thursday.
The 109-page report took aim specifically at Switzerland's UBS AG, arguably the world's largest wealth manager, and Liechtenstein's LGT group, owned by the principality's royal family.
The Swiss Finance Ministry and UBS declined to comment.
The bank has said it is cooperating with Swiss and American investigations and will disclose records involving US clients who might have broken tax laws. But it has also banned its Swiss bankers from travelling to the US
A US federal judge ruled earlier in July that the IRS could serve legal papers to UBS in an expanding probe of US taxpayers who may have used overseas accounts to hide assets and avoid taxes.
The Justice Department requested the summons after former UBS private banker Bradley Birkenfeld, 43, pleaded guilty in a Florida federal court to defrauding the IRS.
Birkenfeld, who is cooperating with investigators, said in court that UBS has about USD 20 billion in assets in undeclared accounts for US taxpayers.
Prosecutors say Birkenfeld and others helped California billionaire Igor Olenicoff hide USD 200 million in assets overseas.
Olenicoff, who controls a real estate empire, pleaded guilty in 2007 to tax charges and agreed to pay the IRS more than USD 52 million.
US taxpayers are required to report all foreign financial accounts if their total value exceeds USD 10,000 at any point during a given year, prosecutors said. Failure to report the accounts can result in a penalty of up to 50 percent of the amount in the accounts.
The subcommittee report said "UBS Swiss bankers targeted US clients, travelled across the country in search of wealthy individuals and aggressively marketed their services to US taxpayers who might otherwise never have opened Swiss accounts."
It said the bank's practices resulted in billions of dollars of US taxpayer money in undeclared accounts that were not disclosed to the IRS. The report said UBS has estimated that it has 1,000 declared accounts in Switzerland for US clients against 19,000 undeclared, with a combined value of USD 17.9 billion.
While UBS did not technically violate US reporting requirements under the 2001 "qualified intermediary programme," it actively assisted clients in structuring their Swiss accounts to avoid disclosure responsibilities with the IRS and thus aided tax evasion, the report said.
In some instances, it said UBS declined to report accounts to the IRS when clients opened them in the names of offshore corporations, trusts, foundations or other entities, even if the bank knew the true beneficial owners were US taxpayers.
"Swiss bank secrecy laws hid not only the misconduct of US taxpayers hiding assets at UBS in Switzerland, but also the actions taken by UBS bankers to assist those US clients," the report said.
[AP / Expatica]