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.

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.