The multi-front effort by U.S. authorities to enforce reporting requirements for offshore accounts is taking place on a complicated international stage.
As we discussed in our September 6 post last year, there has been considerable pushback by U.S. taxpayers against the stepped-up enforcement. Surprisingly large numbers of those taxpayers have even renounced their U.S. citizenship or given up their green cards in response to the new enforcement regime.
Foreign governments and financial institutions have been greatly affected as well. In this post, we will discuss one country: Switzerland.
Swiss bank secrecy was once nearly invincible. But the country's deep tradition of protecting foreign-account privacy has been weakening in recent years in the face of U.S. prosecutions and investigations.
A key juncture came in 2009, when U.S. prosecutors succeeded in pressing tax evasion charges against the Swiss banking giant UBS. To resolve the charges, UBS was forced to pay a $780 million fine and turn over data on hundreds or even thousands of customer accounts.
The UBS prosecution essentially opened up a breach in what was once a nearly impregnable wall. Since then, prosecutions and investigations of alleged offshore tax evasion have proliferated.
There is so much going on, in fact, that Congress is apparently feeling the need to check in on offshore compliance initiatives. The Senate's Permanent Subcommittee on Investigations has announced it will hold a hearing to review the status of offshore enforcement efforts, particularly those directed at Swiss accounts.
Such a hearing could be considered an exercise in saber rattling by the U.S. But the Senate subcommittee's chair, Carl Levin of Michigan, asserts that the U.S. is still losing billions of dollars a year from taxpayers with money in undisclosed foreign accounts.
Source: Bloomberg, "Offshore Tax Evasion Will Be Focus of Senate Hearing," David Voreacos and Cheyenne Hopkins, Feb. 19, 2014