UBS clients consider admitting tax evasion to avoid criminal prosecution

Wealthy clients of Swiss bank UBS AG are seeking amnesty through an Internal Revenue Service voluntary disclosure program that allows U.S. citizens to avoid criminal prosecution if they acknowledge tax evasion and agree to pay taxes and penalties, according to The Wall Street Journal.

"The developments amount to a coup for U.S. authorities, who have spent the past two decades trying to crack offshore banking markets with only incremental progress," the newspaper said.

At the same time, the Journal said, the IRS is considering a national settlement for the estimated 20,000 taxpayers that worked with UBS to avoid taxes. The settlement reportedly would be based on a 2003 landmark offshore credit-card and tax-fraud deal but with stiffer penalties.

See "UBS clients seek amnesty on U.S. taxes."

AIG challenges IRS on tax credit for cross-border financing transactions

American International Group Inc. reported in a securities filing this week that it is pursuing a tax refund from the IRS in a case involving $329 million for "the disallowance of foreign tax credits associated with cross-border financing transactions," The Wall Street Journal said.

Cross-border financing transactions allow companies with overseas subsidiaries to pay foreign taxes, receive a U.S. credit for paying those taxes and then effectively split the credit with foreign lenders which in turn lower their interest costs.

The IRS position is that foreign tax credits shouldn't be allowed for those transactions because the U.S. would effectively be subsidizing the lending of foreign banks since the U.S. company and the foreign bank share the tax break.

In addition, AIG said it had settled a tax dispute related to "lease-in lease-out" tax shelters and anticipated recording an after-tax charge of between $34 million and $100 million in the fourth quarter of this year.

See "AIG's tax dispute with U.S. has a twist of irony."

IRS study finds big gap between corporate tax returns and book income

The Internal Revenue Service found in a recent study that U.S. companies paid federal income taxes on their reported U.S. profits at a rate of 25.3% during 2005 -- far less than the 35% statutory rate, The Wall Street Journal reported today.

The information about tax rates was included in a broader IRS study that examines the gap between income reported to shareholders and the consistently lower income reported to tax authorities, which was published by IRS researchers in the trade journal, Tax Notes.

Senior UBS official indicted in tax-dodge case

U.S. prosecutors have charged one of the highest ranking officials at international banking giant UBS with setting up a system to help about 20,000 wealthy clients hide about $20 billion in assets from U.S. tax authorities.

The indictment against Raoul Weil was filed in U.S. District Court in Fort Lauderdale, Fla. The Wall Street Journal called it "the latest U.S. move aimed at pressuring Swiss banking officials to reveal the names of their American account holders." See "Top banker cited in tax-dodge case."

For more information see:
- "Swiss bank executive charged with aiding U.S. taxpayers evade income tax" (U.S. Department of Justice press release)
- "UBS executive indicted in U.S. inquiry" (The New York Times)
- "Top UBS executive indicted in Florida," (The Washington Post)
- "UBS shares drop after U.S. indicts top banker" (Reuters)

Indy 500 champion Castroneves indicted on income tax fraud

Helio Castroneves, a two-time winner of the Indianapolis 500, was indicted by a grand jury today on charges of income tax fraud conspiracy and with six separate counts of income tax evasion for tax years 1999 through 2004, the Justice Department announced today.

The indictment said one way Castroneves-- a U.S. resident who achieved additional celebrity by winning the champion title in the 2007 season of the TV show, "Dancing with the Stars" -- had hidden income was by creating an offshore Panamanian shell corporation.

For details about the alleged income tax fraud scheme, see the Justice Department press release.

Lead defendant in $60 million tax fraud case sentenced to 18 years

A founder and executive director of the now-defunct Aegis Co., which marketed and sold sham domestic and foreign trust packages to hundreds of wealthy U.S. clients, was sentenced to 18 years in prison.

The company official, Michael A. Vallone, and five co-defendants were convicted in May of participating in a nearly decade-long scheme to divert income from businesses into sham trusts for clients, hiding hundreds of millions of dollars in income for those clients and resulting in a $60 million tax loss to the United States. The government said the case is one of the largest of its kind.

Lawyer pleads guilty to charges related to setting up tax shelters

An attorney with the law firm Arnold & Porter pleaded guilty today to criminal tax fraud charges related to the design, marketing and implementing of tax shelters as a way for rich clients to avoid taxes, the Justice Department said.

The lawyer, Peter Cinquegrani, admitted in court that he had helped submit to the Internal Revenue Service false documentation about the tax shelters and taken other steps to support the tax evasion scheme.

At the same time, the IRS announced it had reached a settlement with Arnold & Porter related to charges that the law firm had failed to comply with tax shelter organization requirements and that it had marketed fraudulent tax shelters to clients.