Monday, November 21, 2011

Billionaires avoid more than just income tax

Billionaires can pull millions out of appreciated assets in ways that allow them to avoid taxes on that cash without violating any IRS rules, reports Jesse Drucker of Bloomberg News.

The ability to avoid those taxes is an overlooked aspect of the debate over whether to increase the income tax that the wealthiest people in the U.S. should pay, the story notes.

“The problem is not that people like Warren Buffett pay tax at a 17 percent rate, it’s that they can use complex transactions not available to most Americans to get cash from their appreciated stock without paying any taxes at all,” said David S. Miller, a tax attorney and former chair of the tax section of the New York State Bar Association.

Wednesday, November 2, 2011

G-20 countries should consider whistleblowers to help stop tax evasion

Many countries are trying to crack down on tax evasion as a way to increase revenues. But they are overlooking a powerful weapon: whistleblowers.

Tax evasion and compliance is on the agenda of the group of 20 countries this week. Only the U.S. has a program to reward whistleblowers for reporting tax evasion or other tax law violations. The Internal Revenue Service will reward whistleblowers 15 percent to 30 percent of funds recovered as a result of the whistleblower's information and help if the amount exceeds $2 million, including tax, penalties and interest.

The U.K. took a major step this week to encourage whistleblowers with information about financial crime. The Serious Fraud Office set up a whistleblower hotline and said it protect the whistleblower's identity.

Thursday, August 4, 2011

California offers amnesty for investors in abusive tax shelters

California has launched a tax amnesty program for people who used abusive tax shelters or offshore financial arrangements to evade or avoid state taxes.

The California Franchise Tax Board announced the initiative, called “Voluntary Compliance Initiative 2,” earlier this week. Participants in the program can avoid most penalties and criminal prosecution, the tax board says. The filing period for the amnesty program ends Oct. 31.

The San Francisco Chronicle reports that the tax board has contacted 47,000 taxpayers who might be eligible.

Tuesday, August 2, 2011

Former UBS banker indicted in tax evasion conspiracy case

A former UBS banker was indicted today on a charge that he helped U.S. clients evade taxes through accounts at UBS and a regional Swiss bank.

The indictment says the banker, Martin Lack, discouraged at least nine U.S. customer from joining an Internal Revenue Service amnesty program offered to those who were hiding assets overseas. He also offered to provide his customers with falsified bank documents to conceal the source of the funds in their undeclared bank accounts, according to the indictment.

Lack, a Swiss resident, is accused of conspiring with another UBS banker to encourage U.S. clients to move their undeclared UBS accounts to the smaller regional bank, which news reports identify as Basler Kantonalbank. The other UBS banker, Renzo Gadola, pleaded guilty last year to similar charges in federal court in Miami.

Monday, July 18, 2011

Switzerland’s Credit Suisse bank targeted for criminal investigation by DOJ

Switzerland’s second largest bank, Credit Suisse Group AG, announced last week that it is the target of a criminal investigation by the Department of Justice, pertaining to former cross-border banking services provided to US clients.

According to Justice Department guidelines, there must be “significant evidence” of illegal activity for the DOJ to target an entity for investigation. In February, four Credit Suisse employees were indicted for allegedly helping US clients evade taxes through secret bank accounts.

Following the agreement reached in 2008 with UBS, Switzerland’s largest bank, some experts have speculated that this investigation could follow a similar trajectory. As a result of that action, UBS signed a differed prosecution deal which required the bank to pay $780 million and turn over data on 250 US clients – it has since provided data on an additional 4,450 accounts.

Credit Suisse is also under investigation in Germany for allegedly helping German clients evade taxes.

Friday, April 22, 2011

New rules for Swiss banks mark shift away from undeclared assets

Switzerland is expected to make changes to its banking laws that will make it more difficult for European neighbors to hide their assets from tax collectors. The proposed agreement with Germany and Britain, expected to be reached by the summer of this year, is intended to preserve banking secrecy, but marks a shift away from undeclared assets. France and Italy are expected to reach similar deals with Switzerland thereafter.

Switzerland is seeking to avoid recurrences of some of the more contentious responses to the problem of banking secrecy for foreign tax collectors, such as the lawsuit between the IRS and UBS that resulted in a payment of $780 million, Swiss bankers being arrested abroad, and the theft and sale of Swizz bank client lists to foreign governments that wish to collect taxes legally owed to them.

The shift in Switzerland’s banking will likely result in the downsizing or consolidation of some firms that rely solely on undeclared assets. Although client confidentiality will be retained under the proposed agreement, Swiss banks will likely be forced to compete in a more transparent environment, the results of which are only beginning to unfold.

Monday, April 11, 2011

IRS to focus on tax evasion schemes in India

The IRS is now considering India among the countries believed to be facilitating major off-shore tax evasion for wealthy Americans, as indicated by the Justice Department’s efforts to acquire the names Indian-American HSBC clients suspected of evading taxes through offshore banking in India.

The request for permission from a federal Judge by the Justice Department to demand those names comes on the heels of a protracted legal engagement with UBS in Switzerland. That action began in 2008 and ended last August with the agreement by UBS to provide information on 4,500 American clients. The IRS is now expanding its anti-fraud efforts to India, a region not previously considered a hotbed for offshore evasion.

According to the New York Times, sources close to the matter indicate that HSBC’s N.R.I. program (Non-Resident Indian), which sought out Indian-Americans for banking in India, may be related to the current legal effort. HSBC has indicated that it does not condone tax evasion, and will cooperate with US requests “while complying with the law in all jurisdictions in which it operates, including India.”

IRS releases “Dirty Dozen” list of worst tax scams for 2011

The IRS has produced a “Dirty Dozen” list of 12 fraudulent and illegal tax schemes, representing “the worst of the worst” in tax scams, according to IRS Commissioner Doug Schulman.

Among the scams included in the list are: hiding income offshore, identity theft and phishing, return preparer fraud, filing false of misleading forms, frivolous arguments, nontaxable social security benefits with exaggerated withholding credit, abuse of charitable organizations and deductions, and abusive retirement plans.

The IRS warns that while such activities may appear to present opportunities to retain wealth illegally by defrauding the government, these scams frequently result in heavy fines, full repayment of taxes (plus interest), and often jail time.

Friday, March 18, 2011

Former UBS client pleads guilty to offshore tax evasion

Richard Werdiger, a former client of Zurich-based UBS AG, has pleaded guilty to concealing assets from the IRS in offshore bank accounts.

The 63-year-old is one of 7 former UBS clients believed to have concealed over $100 million from the IRS. Werdiger was accused of hiding $7 million in 3 accounts in Panama and Lichtenstein.

The former UBS client has agreed to pay $3.5 million in civil penalties and faces up to 20 years in prison when he is sentenced on June 14. The accusations form part of a larger IRS crackdown on offshore tax evasion, which has previously made UBS a focus of interest.

Friday, March 11, 2011

IRS offers information on offshore tax amnesty program in eight new languages

The IRS has released information on its 2011 Offshore Voluntary Disclosure Initiative in several languages, following requests from taxpayers and tax professionals to make the program more accessible to persons who primarily speak non-English languages.

Information on the new amnesty program is now available in Chinese (traditional and simplified), Farsi, German, Hindi, Korean, Russian, Spanish, and Vietnamese. The program creates an incentive for persons owing taxes to the IRS on hidden offshore accounts to come forward and pay their fines, by offering amnesty from some of the harsher penalties that could be applied.

A similar version of this program was offered last year and resulted in thousands of self-disclosures. This current program is less forgiving of tax cheats than the first iteration, but still offers ample motivation for persons guilty of offshore tax fraud to pay their fines and forgo potentially harsher punishment.

Friday, March 4, 2011

Government crackdown on tax attorney fraud continues

The US Justice Department has accused Scott Waage, a tax lawyer in San Diego, of using illegal tax schemes to withhold $10.8 million in clients’ assets that should have been paid to the IRS.

The complaint alleging Waage’s use of fraudulent tax shelters comes on the heels of another complaint filed against attorneys Charles Klink and Caleb Grodsky, who allegedly used an illegal tax scheme designed to help them avoid paying corporate taxes on income generated from the sale of their clients' business assets, according to the National Law Journal (subscription required).

According to the complaint, Waage advertised himself as a “visionary tax attorney.” He started his own law firm, now titled Strategic Law Group, which allegedly promoted illegal tax schemes that Waage used (for his own assets as well as those of his clients) to defraud the government of millions of dollars.

Friday, February 25, 2011

US pursuit of tax fraud scheme providers continues in Switzerland

Arrest warrants were issued following the Wednesday indictment of four bankers believed to have been hiding as much as $3 billion from the IRS.

Although all four bankers are employed by the Zurich-based Credit Suisse Group, the bank itself was not charged in the indictment. However, the indictment states that bank officials "knew and should have known that they were aiding and abetting U.S. customers in evading their U.S. income taxes."

The US government alleges that the fraud goes back to as far as 1953, and that in 2008, Credit Suisse was maintaining thousands of hidden accounts for US customers. Additionally, the indictment claims that that the fours bankers encouraged clients not to participate in President Obama’s tax amnesty program last year.

The AP notes that this is the first major criminal prosecution not involving Swiss-based UBS AG. In that landmark case, the UBS turned over thousands of names and paid a $780 million fine for helping US citizens conceal assets from the IRS.

Wednesday, February 23, 2011

Hunting down tax cheats in Switzerland gets easier

Switzerland has taken steps towards improving cooperation with countries seeking to pursue tax evaders hiding funds in the country.

Before the change in policy, which will take effect following Parliament’s approval, countries seeking information on tax evaders could receive administrative assistance from the Swiss government only with the full name and address of the parties of interest; the new policy will allow governments to use more varied search methods and provide less complete information.

However, the Swiss Ministry has said that it will not allow for “fishing expeditions,” whereby a government might attempt to gain information on parties that are not reasonably suspected of any wrongdoing.

The policy change comes on the heels of increased pressure from the US government to pursue tax evaders in Switzerland and other countries, including a sustained inquiry into UBS, Switzerland's biggest bank, which was recently completed.

Thursday, February 10, 2011

IRS announces new amnesty program for tax cheats

As previously indicated, the IRS has announced a new amnesty program for tax cheats who have concealed money in foreign bank accounts. The program comes on the heels of increased IRS scrutiny of foreign banking, notably UBS and Deutsch Bank AG.

The new program bears many similarities to a prior tax amnesty program which ran from March through October of 2009, and resulted in 15,000 Americans’ confession of illegal tax avoidance. The current program is less lenient, so as not to reward those who have waited, but also offers a few specific caveats for smaller accounts held by persons who can prove minimal knowledge or involvement in the offshore account. Persons to whom those specifications would have applied in the first amnesty program are invited to return now and have their fines reassessed.

According to the Wall Street Journal, the primary incentive for Americans to come forward is to avoid jail time or harsher fines. IRS Commissioner Doug Shulman stated that the program “gives people a chance to come in before we find them.” The new program is “the last, best chance for people to get back into the system,” he said. The deadline has been set for August 31, 2011.

Thursday, January 27, 2011

Federal indictment of tax cheat suggests possible implications for HSBC and IRS amnesty program

A recent federal indictment of a wealthy American accused of concealing money from the IRS in foreign tax shelters may signal a large-scale legal action against HSCB. Persons familiar with the indictment of Vaibhav Dahake told the New York Times that HSBC was the unidentified international bank that advised the illegal use of tax shelters.

Federal authorities are said to be considering a legal summons intended to ascertain the degree to which HSBC was actively marketing these illegal services to clients. A similar recent summons served on UBS resulted in the disclosure of several thousand client names.

The indictment of Dahake cited a number of unidentified bankers who advised him, among other things, not to file forms with the IRS and that money transferred between British Virgin Islands accounts and Indian accounts would not be monitored or noticed by US authorities.

A lawyer for Dahake said that he perceived a connection between the indictment and the impending IRS amnesty program for tax cheats. He called the indictment a “clubbed invitation” for wealthy Americans concealing money in foreign accounts to come forward, declare their money, pay their taxes, and suffer reduced fines and penalties as part of the amnesty program.

Wednesday, January 26, 2011

IRS to announce second amnesty program for self-disclosing tax cheats

The IRS will soon be announcing a second amnesty program for Americans concealing accounts in foreign tax shelters; it will not be “as generous” as the last program, which 15,000 Americans opted to participate in (as well as an additional 3,000 after the October 15 deadline).

A white collar criminal defense lawyer told The New York Times that some Americans may have cheated the IRS by paying taxes on a smaller UBS account while concealing larger accounts in a smaller Swiss bank. A current focus of US prosecution is the use of regional Swiss banks, known as cantonal banks, which have been utilized successfully by tax evaders.

While the terms of the impending amnesty program have not yet been outlined in detail, they are expected to be similar to those of the previous program. However, one authority suggested to the Times that guilty parties might be better served by coming forward even prior to the program’s announcement, as ongoing investigations could reveal the offender’s identity before a voluntary disclosure, potentially voiding the possibility of amnesty.

Tuesday, January 4, 2011

Guilty plea from Swiss banker could indicate new direction in US fight against illegal tax havens

A Swiss banker and former UBS employee’s recent guilty plea in a US tax case suggests a possible new direction and commitment for the US in its fight against illegal tax havens abroad.

Renzo Gadola was accused of recently travelling to Miami to advise a wealthy American to illegally conceal her money in a regional Swiss bank. The type of bank into which Gadola had intended to conceal the funds is known as a cantonal bank.

Attorney Brian Skarlatos, whose firm represents numerous former UBS account holders, told The Wall Street Journal that the regional cantonal banks were thought, until now, to be places where it was “safe to hide [US] money because those banks do not do business in the United States.”

Gadola’s guilty plea and cooperation with US officials could mark the beginning of further US efforts to root out illegally hidden, taxable US money in cantonal Swiss banks.