Tuesday, November 17, 2009

Offshore Bank Account Amnesty

Some 14,700 rich Americans worried about a U.S. government crackdown on offshore tax cheats came forward to participate in a tax amnesty program, the top U.S. tax official said on Tuesday.




Participation in the Internal Revenue Service's amnesty program was "unprecedented" and the final number was nearly double the agency's estimate in October, U.S. Internal Revenue Service Commissioner Douglas Shulman told reporters in a telephone briefing.



The IRS amnesty program, which ended in October, offered reduced penalties for wealthy Americans who voluntarily disclosed previously undeclared foreign bank accounts and assets. "We were flooded with people coming in the final days of the program," Shulman said.



"The IRS has never got anything like that in response to prior initiatives," said Barbara Kaplan, a lawyer for high net- worth clients in New York. "It's a little higher than I anticipated based on the pace of my own practice and the panic that was out there."



While agency officials were still analyzing the amount of offshore assets and bank accounts disclosed, Shulman said "we are talking about billions of dollars coming into the U.S. treasury" from the amnesty program.



Of the 14,700 newly disclosed accounts, Shulman said many involved bank accounts in Switzerland and Europe, but assets were also hidden in more than 70 countries.



"The whole game around bank secrecy, around offshore (tax) evasion is changing" because of pressure from the U.S. Justice Department and from international capital markets, he said.



At the center of the U.S. efforts to combat tax evasion abroad is a case against Swiss banking giant UBS AG, which led the bank to agree to reveal the names of 4,450 client accounts.



Shulman also said the outpouring of hidden offshore accounts does not affect in any way the obligation of UBS to turn over those American account-holder names. There had been some speculation that success in the amnesty program would cut the obligation of UBS to turn over accounts.



"Some have misinterpreted this," Shulman said.



Although the amnesty program has ended, Shulman encouraged Americans with hidden offshore assets to continue to come forward and talk with the IRS about them. "It will be much worse for them if we find them first," he said.



CRITERIA



The U.S. and Swiss governments also released on Tuesday the criteria it used to arrive at the 4,450 accounts that parties agreed UBS would eventually turn over to U.S. authorities.



The Swiss Justice Department said it would hand over the names of wealthy U.S. clients of UBS with accounts holding more than 1 million Swiss francs ($986,200) where there is a reasonable suspicion of tax fraud.



Accounts of a lesser size could come under the deal where there is a "scheme of lies" identified, according to the document.



It describes suspicious activity that could be interpreted as tax fraud including the use of debit cards, cell phones or wire transfers to hide accounts.



Shulman said the agreement will give the U.S. accounts it is most interested in -- those where taxpayers exhibited the most egregious behavior, those that would be hardest for the U.S. to identify and accounts with the largest holdings.



Submission of data to U.S. authorities applies to UBS accounts held between 2001 and 2008 by U.S. citizens.
More than 14,700 U.S. taxpayers came forward to disclose billions in offshore bank accounts in 70 countries under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe, IRS officials said Tuesday.




A flood of people came forward in the last days before the amnesty program expired Oct. 15, IRS Commissioner Doug Shulman said. The final total far surpasses the number who disclose offshore accounts in a typical year — about 100 — and comes amid a broad U.S. crackdown on international tax evasion at Swiss bank UBS AG and other institutions.



"To put it simply, this is a historic milestone for the nation's hardworking taxpayers," Shulman said in a conference call from Washington.



The total in taxes, interest and penalties collected from those in the voluntary disclosure program will be in the "billions of dollars," Shulman said. The disclosures involved accounts on every continent but Antarctica.



Taxpayers flocked to the amnesty program after the U.S. reached an agreement in August with the Swiss government and UBS to obtain names of 4,450 U.S. taxpayers believed to be hiding assets in secret bank accounts. Earlier this year, UBS paid a $780 million penalty under a deferred prosecution agreement filed in a Florida federal court that included disclosure of an additional 150 names.



Seven of those people have been charged criminally, with at least two getting sentenced to prison time.



Shulman said the combination of the UBS disclosures and the amnesty program have fundamentally changed the offshore tax landscape, particularly in Switzerland where bank secrecy was the tradition for centuries.



"It shows we are serious about piercing the veil of bank secrecy," he said. "The whole game has changed."



Also Tuesday, the IRS and Swiss unveiled the criteria being used to determine which American UBS accounts will be disclosed under the August agreement.



Accounts being targeted include those that contained 1 million or more Swiss francs at any time between 2001 and 2008; instances in which there was clear fraudulent actions, such as false documents; and accounts that earned an average of 100,000 francs a year for at least three years.



The Swiss have until the end of August to hand over the names. Swiss officials said the first 400 names will be chosen by the end of this week, with another 100 expected to be ready by the end of the month. Those taxpayers who are picked for disclosure can appeal to Switzerland's top administrative court.

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