An official of the Swiss bank UBS announced that it was halting its offshore banking services for US citizens after it came under scathing criticism for facilitating massive tax evasion.
The official, Mark Branson, also said the bank is cooperating with the US government to identify US clients who might have committed tax fraud.
Branson told the Senate Permanent Subcommittee of Investigation that the bank “genuinely regrets” failures in complying with US regulations and will stop offering offshore banking to Americans.
You were caught, suckers!
“That means UBS will no longer provide offshore banking and securities services to US residents through its bank branches. Such services will only be provided to residents of this country through companies licensed in the United States,” he said.
In addition, he added, “we are working with the US government to identify the names of US clients who may have engaged in tax fraud.”
That’s the quid pro quo. “We’ll turn over our clients. We’re good boys, now. Let us go free!”
Your link doesn’t work for me.
I’m hoping the linked article would mention what off shore banking is good for except tax evasion?
I think the list of cheats would be 99% a list of their depositors? Let the jury find the innocent ones.
Try this one: http://tinyurl.com/6ed3zs
Does Phil Gramm still work for UBS?
#1, bobbo.
The valid reasons for an offshore bank account are enormous.
The banking system in the US has gone down the crapper along with much of the rest of the financial industry.
In the US, Federal regulations have put a stranglehold on the goods and services banks can provide. If it isn’t plain vanilla, it isn’t available.
Competition is a good thing and offshore banking institutions understand this. The variety of, and rates of return on, financial instruments is way above and beyond what is available in the US.
An additional advantage to offshore banking is litigation. Say here in the US you own a company which makes filters for kidney dialysis machines. One day the machine stops working and someone dies.
During the resulting lawsuit the prosecuting lawyers convince the judge to put a freeze on all your assets (so they can go after them).
Later, it is discovered that a nurse accidentally unplugged the machine and you were not at fault. Irregardless, because of the freeze your company had to go out of business. You loose anyhow.
Don’t think this doesn’t happen. In fact, it’s par for the course.
The best way out is to have an offshore account because US court orders rarely apply to other countries. In many countries they never apply at all, so the order is ignored.
Therefore, by having at least an Easter Egg in an offshore account, your business can stay in business.
Not to mention, even though some Americans were on the list of customers, their status on tax evasion has yet to be determined. Just because their name is on an offshore account doesn’t mean they were evading taxes.
More importantly, the account could be a foreign corporation with an American named as executor.
#3–Ah Yea==I tried to acknowledge there were legitimate reasons for off-shore banking by leaving that 1%. To that end, I don’t think that avoiding American Law is one of them except for its practical reality. In other “legitimate” reasons?
Hey bobbo,
A couple of reasons to have offshore accounts. Yes, one is tax. If you’re working offshore it is convenient and lets you move your money back home at the best tax rates.
Second, it’s easier to invest overseas with an offshore account. For example, Britain and Germany have some pretty interesting fund accounts which you couldn’t buy into as a US based investor.
There are, of course, many illegal reasons to have an offshore account, or maybe you just don’t trust your country’s banking system
#6–Thanks QB. That even makes sense and would even be legal if those funds were legal on the first transfer?
Years ago I looked at certain investment accounts in Germany that were returning double their American counterparts. At the time, I thought the EU was likely too dysfunctional trying to bring Spain, Ireland, Turkey into the Union, the unrestrained legal and illegal immigrations, the difficulties of harmonizing the currencies and what not. I thought the good returns were teaser rates to get the bucks in.
Little did I realize how easy it was to ruin the American Economy. NAFTA and BUSHCO was all it took. Now, I gotta learn Spanish.
Substituted an updated link…
Of course tax benefits are a reason to have an offshore account. We are in a global economy and that means governments are competing for businesses as much as businesses are competing with each other. I believe the US is the only country that taxes individual income made outside the host country (US) which is ridiculous.
I’m SHOCKED to find tax evaders in your bank, Rick!
Big deal, there are other banks.
I thought this had more to do with the person who QUIT the business, and took the records WITH HIM, and offered them to Different GOVS, for a price..
http://www.techdirt.com/articles/20080716/0225551698.shtml
“Irregardless” isn’t a word.
#12–ECA==best link in a long time. Greed motivates just about everything in this world, even the right thing(s) to do!
Bravo. I can’t wait for the movie.
For those that are proven in court as tax evaders, how about putting in place a law similar to what is done for petty drug dealers – seize all the assets they have hidden illegally. More of a discouragement than tax penalties that I bet a good tax lawyer can negotiate down. To me, tax evaders at this level impact society as much as the corner drug provider. Neither are contributing positively to our society. Both count only the dollars they have.
What seems to have been conveniently ignored, amid all the moral outrage and hypocrisy, is the simple fact that receiving stolen goods is a crime in any nation state operating under the rule of law. It is interesting, though not entirely surprising, that such moral niceties can be conveniently ignored when money and governments are involved. Can we expect the bureaucrats who authorized payment to this guy to be properly prosecuted in the near future for receiving stolen goods? Don’t hold your breath.
#9, Thomas,
I believe the US is the only country that taxes individual income made outside the host country (US) which is ridiculous.
Wrong. Most countries do tax monies earned outside the country. It is called “Earned Income”. The convention is that the money will be taxed to the higher rate of either the foreign or home country and no more.
If someone works in Saudi Arabia which doesn’t have an income tax, the person is expected to pay the US rate in the US. If he worked in Canada, where the rate is higher, he would pay the Canadian rate to Canada. The higher Canadian taxes paid would offset any US taxes due so he would not have to pay American taxes. A Canadian working in the US would pay the US tax then use that amount to offset his Canadian tax and pay the difference to Canada.
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#15, Henkel
To me, tax evaders at this level impact society as much as the corner drug provider.
I disagree. They are much worse. A drug dealer hurts one person. The missed taxes hurt the nation.
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#16, fred,
… is the simple fact that receiving stolen goods is a crime
I agree and was wondering if UBS would end up being charged for money laundering. The wing nuts are all in favor of Law and Order until it effects them.
#17
I’m not convinced you understand the question since you are so easily confused. If a US citizen works overseas, I am quite aware that they are required to pay US income tax on money earned overseas in addition to tax in the host country. However, if say German citizen works and makes money in the US, I do not believe they are required to pay German income tax. I believe the US is unique in the respect of forcing its citizens to pay tax on any and all income even if it was not earned in the US.
If you have evidence to the contrary, I would be interested in seeing.
In the EU at least, the answer is mostly no:
European Union withholding tax
Msr. Fusion said “The convention is that the money will be taxed to the higher rate of either the foreign or home country and no more.”
Well sort of but not really. Half the “draw” of working overseas is not paying taxes if you can help it. If you work outside your country get an accounting firm who understands the tax laws in the reciprocal countries to file your returns. If your own company sends you overseas than they should provide tax help.
If you work it right and depending on the amount of time you spend in each country your tax rate could be far lower. Most companies I’ve dealt with factor this into overseas assignments.
For example, spending a couple of weeks in a third country can help. Also, delaying or accelerating payment can improve your tax position. There are all sorts of legal and legitimate approaches for improving your out of country tax situation. I know one large energy services company that keeps a subsidiary in West Indies for just that reason.
#20, QB,
You are quite right, there are many options available. BUT, remember, the IRS is aware of most schemes and will prosecute if you try to evade your due. Most benefits accrue do to your expenses. BUT, as you point out, use a tax professional.
Currently off shore companies benefit mostly companies as they don’t need to bring the money back into the US. Tyco, Haliburton, KBR, and other high profile companies currently use this technique. Haliburton and KBR are under investigation and at least one Judge has ruled them shame companies.
#21 “remember, the IRS is aware of most schemes…”
More like Revenue Canada in my case. 😉
Canada doesn’t require non-residents (who may still be citizens) to pay income tax on non-Canadian income. That may be different from the US.
I can think of other reasons to open a Swiss bank account.
First, in Canada, every time you try to make an investment through a bank, the bank representative is required by law (!) to advise you not to put your eggs in one basket. Investing in another country is the apotheosis (I guess I’m not using the word correctly …) of that advice.
Second, your deposit is denominated in a different currency. How easy is it to go to Ma and Pa bank and open a Swiss Franc account? And if you had put your saving in Swiss Francs 2 or 40 years ago, how much would they be worth in dollars today?
Third, it may be a question of (legal) tax avoidance rather than (illegal) tax evasion.
Fourth, the quality of service might be better.
Fifth, you might be able to open a kind of account
not available in the US because of law or habits of the banks.
Sixth, governments’ desires to know more about your affairs may be coming to exceed what is reasonable or constitutional.
Seventh, if the government or the banking system melts down, you’ll have a partial backup. An offsite backup, no less.
#22
As I suspected, we are talking about different types of income. One type of income is from investments made in other country’s banks and investment firms. Another is money earned through wages in other countries.
The second link on the EU sheds a little light on the subject. It separates workers into a couple of groups: cross-border workers, resident workers and non-resident workers. A resident worker is one that is a citizen of a given country and works within its borders. A cross-border worker is one that lives in the country of citizenship but works in another country. A non-resident worker is one that lives and works in another country. With respect to the US, if you are in the last category, you still must pay US income tax. However, I believe that in the EU you only pay tax from the host country.
This is what I was looking for International taxation (emphasis added):
(Apparently, there is no emphasis to be had when within a blockquote).
#25, Thomas,
I think I’ll leave it there. Tax Law is for the professionals. Us mere mortals have better things to do.
Probably, what happened with UBS will happen with other Swiss banks. And after the same in Andorra, Lichenstein, Jersey, Guernsey, Cayman, etc.