Swiss to Block UBS From Providing Data to U.S.

by Dollars and Sense

From yesterday's New York Times, an article about the U.B.S. tax case. For those of us who are dying to have a peek at the names of the 52,000 rich Americans who are evading taxes by putting their money in the Swiss bank, it looks as if we may have to wait.

The funniest bit of this article is toward the end, where it says that "The Swiss agreed in March to abide by Article 26 of the Organization for Economic Cooperation and Development's tax convention, which requires national tax authorities to exchange information on request if there is probable cause to suspect tax evasion." But in the previous paragraph it had said that "Switzerland distinguishes between tax fraud and tax evasion, and does not consider tax evasion to be a crime." So they are solemnly pledging "to exchange information on request if there is probable cause to suspect tax evasion," but they don't regard tax evasion as a crime. Hmm... —cs

For more on tax havens, see our May/June cover article.

Swiss Vow to Block UBS From Providing Data to U.S.

By DAVID JOLLY
Published: July 8, 2009

PARIS — The Swiss government said Wednesday that it was prepared to seize U.B.S. client data rather than allow the bank to hand it over to the United States to settle a tax case.

U.B.S. has refused a demand from U.S. authorities that it turn over the names of 52,000 American clients, arguing that to do so would be illegal under Swiss banking secrecy laws and would open it to prosecution at home. The U.S. Justice Department in February sued U.B.S., saying it suspected the bank of helping wealthy Americans hide billions of dollars in secret offshore accounts.

"Switzerland makes it perfectly clear that Swiss law prohibits U.B.S. from complying with a possible order by the court in Miami to hand over the client information," the Swiss Department of Justice and Police said Wednesday in a statement on its Web site, a day after it made a filing to the same effect in the U.S. District Court in Miami. Therefore, "all the necessary measures should be taken to prevent U.B.S. from handing over the information on the 52,000 account holders demanded in the U.S. civil proceeding," it added.

The Swiss government will issue an order explicitly prohibiting U.B.S. from handing over client information "if circumstances require," it said.

Serge Steiner, a U.B.S. spokesman in Zurich, said it has always been U.B.S.'s position that divulging the client data would be a breach of Swiss law, and "the issue should be discussed by the two friendly governments.'' The bank, he added, is "always open to an appropriate solution.''

U.B.S., the largest Swiss bank, is under great pressure to reach an agreement. The bank has already paid $780 million and turned over the names of more than 250 clients to avoid prosecution on allegations that it defrauded the Internal Revenue Service. Its soured investments, many on American subprime mortgages, have cost it $53 billion in write-downs, sending it to taxpayers for a bailout. U.B.S. officials were not immediately available for comment Wednesday.

"On the one side you have the U.S. government wanting to get back some missing taxes and on the other you have a bank that is admitting some responsibility," said Nicolas Michellod, an analyst in Zurich with Celent, a financial research firm. "Eventually, I'm sure we'll see U.B.S. paying a fine."

U.B.S. last month raised about $3.5 billion in new capital, and Mr. Michellod suggested the bank might have been provisioning for just such an eventuality.

Doris Leuthard, the Swiss economy minister, said Tuesday in Washington that U.B.S. had made mistakes and would have to "pay a price" to reach a deal.

The dispute, which has strained relations between the United States and Switzerland, takes place amid wider efforts by countries including France, Germany and the United States to increase transparency in tax havens like the Channel and Jersey Islands, Switzerland and Luxembourg.

Switzerland distinguishes between tax fraud and tax evasion, and does not consider tax evasion to be a crime.

The Swiss agreed in March to abide by Article 26 of the Organization for Economic Cooperation and Development's tax convention, which requires national tax authorities to exchange information on request if there is probable cause to suspect tax evasion. But the government has also said that it "has no intention of relinquishing bank secrecy."

In Paris, the O.E.C.D. said Wednesday that one of those countries, Luxembourg, had now "substantially implemented the internationally agreed standard" of transparency in the exchange of tax information. While Luxembourg's work is not finished, Angel Gurría, the organization's secretary general said, "The process is working and I look forward to other countries following the example that Luxembourg has set."

Read the original article.

Labels: OECD, Switzerland, tax evasion, tax fraud, tax havens, UBS

 

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7/09/2009 10:22:00 AM 0 comments

 

AIG Sues To Get $306 Million In Taxes BACK!

by Dollars and Sense

AIG gets $170 billion from taxpayers. Taxpayers now own 80% of the company. Company hands out hundreds of millions in bonuses. Congress and Treasury claim they had no idea and can't stop the payments. Congress announces new taxes to recover most egregious bonuses (e.g. million dollar "retention" payouts to people that have left). And now this. The company is suing the federal government to get $306 million it paid after being busted for illegal use of offshore tax shenanigans. A government-owned company is suing the government to get back tax money it paid for not paying its taxes, and is using taxpayer money to pay the lawyers.

My head hurts.

From the NYT:

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company's financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.'s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.'s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.

The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.

United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the I.R.S. denied A.I.G.'s refund claims in 2008, saying that it had improperly calculated the credits. The I.R.S. has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring.

The remainder of A.I.G.'s claim, for $244 million, concerns net operating loss carry-backs, capital loss carry-backs, a general refund claim and claims for refunds of other tax-related payments that A.I.G. says it made to the I.R.S. but are now owed back. The claim also covers $119 million in penalties and interest that A.I.G. says it is due back from the government.

In part, A.I.G. says it overpaid its federal income taxes after a 2004 accounting scandal that caused it to restate its financial records. A.I.G. says in part that it is entitled to a refund of $33 million that SICO paid in 1997 as compensation to employees, which it now says should be characterized as a deductible expense.

A.I.G.'s lawyers in the case, at Sutherland Asbill & Brennan, referred calls to the company. Asked about the lawsuit, Mark Herr, an A.I.G. spokesman, said Thursday that "A.I.G. is taking this action to ensure that it is not required to pay more than its fair share of taxes."

Labels: AIG, tax dodges, tax havens

 

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3/20/2009 01:10:00 PM 1 comments

 

Alternative Job Creation Plan (S. Aronowitz)

by Dollars and Sense

This is from Bob Feldman—he sent it to me before the last item he sent for me to post about alternative job creation plans (the one from a 1973 book), but I forgot to post it. It raises interesting issues that we have covered in D&S, e.g. the idea of a "basic income guarantee" (and he might have also mentioned the related idea of "employer of last resort," which we covered in our March/April 2008 issue), and the key issue of tax havens, which we'll be covering in our May/June issue.

Aronowitz's Alternative Jobs Creation Plan Of 2005

If you're wondering what an alternative left jobs creation program to the Obama Administration's recently enacted "stimulus" economic program might look like, here's what CUNY Grad School Professor Stanley Aronowitz proposed in his 2005 book Just Around The Corner: The Paradox of the Jobless Recovery:

"Slightly less than 10 percent of the annual military budget (not counting emergency Iraq funds), $50 billion, would create almost 2.5 million jobs...Jobs could be created to build low-and moderate-rental or limited-equity cooperative housing (where `owners' are obliged to sell their apartments back to the co-op rather than offer them for sale in the private market)...

"...The housing story of the postwar era has been one of federal, state and local abandonment and betrayal of the brave New Deal public-housing program. It was replaced by a program that used public funds to subsidize private developers...

"Where will we get the funds for creating public jobs and for building new housing...? We urgently need to reinstitute a progressive tax system where large corporations and wealthy individuals are required to pay their fair share and no individual or profitable business is exempt from paying taxes. In addition, in the interest of creating these jobs, loopholes for upper-middle-income taxpayers should be closed. And the bloated military budget, much of which neither enhances our security nor is justified if we had a reasonable foreign policy that was not oriented toward empire, could be slashed and reorganized. The savings could help fund a labor-intensive public-service jobs program.

"Would this jobs program require a new government institution such as the New Deal Public Works and Works Project Administration (PWA and WPA)? Probably...It would be important to stipulate that these are public jobs to expand public goods, and slots should not be crated to subsidize wages in the private sector. Right now, huge quantities of federal funds are shoveled into private contractors' pockets...

"...When will working people share in the benefits of the technological revolution of our time?

"We need to amend the Wage and Hour Act to provide for overtime pay for work performed after 6 hours in any day, and after 30 hours a week...

"What to do about the unwaged and the underwaged?...America needs a basic-income guarantee...It is time to revive the concept of a basic guaranteed income for all Americans...

"...Corporations that register offshore must be required to pay U.S. taxes. Those who avoid such taxes should lose their right to sell their goods and services in this country. (Of all U.S. corporations, 60 percent failed to pay taxes in 2003. Many of them were registered in another country, usually a Caribbean site; others simply took advantage of gaping loopholes in U.S. tax law.)"

--b.f.

Labels: basic income guarantee, Employer of Last Resort, jobs, militarism, Stanley Aronowitz, tax havens, unemployment

 

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2/26/2009 10:14:00 AM 0 comments

 

Rich Americans Suing UBS

by Dollars and Sense

From yesterday's Times—interesting ongoing case about the Swiss bank UBS, the world's largest private bank, which agreed to pay $780 million "to settle accusations that it used undisclosed offshore private banking services to help wealthy Americans evade taxes." The Justice Department is trying to force UBS to disclose 52,000 of its U.S. clients' names, which could be very juicy. Don't you want to know who they are, how much money they have in UBS, and how much in taxes they have evaded? Well--these folks don't want you to know.

Group of Rich Americans Sues UBS to Keep Names Secret in Tax Case

By LYNNLEY BROWNING | February 24, 2009

UBS was sued on Tuesday in a Swiss federal court by wealthy American clients seeking to prevent the disclosure of their identities as part of a tax-evasion investigation by the United States Justice Department.

The lawsuit accuses UBS and Switzerland’s financial regulator, the Swiss Financial Market Supervisory Authority, or Finma, of violating Swiss bank secrecy laws and of conducting what Swiss law considers illegal activities with foreign authorities. It also named Peter Kurer, the chairman of UBS, and Eugen Haltiner, the chairman of Finma, as defendants.

The suit, filed by a lawyer in Zurich, Andreas Rued, on behalf of nearly a dozen American clients, underscores the growing clash between Swiss banking secrecy laws and those of the United States. Tax evasion is not considered a crime in Switzerland. Disclosing client names under Swiss law is a criminal offense and can expose bank executives and officers to fines, prison terms and other penalties.

UBS is the world’s largest private bank and Switzerland is the world’s largest offshore tax haven, with trillions of dollars in assets.

The lawsuit, which UBS described in an internal memo late Tuesday, stems from UBS’s agreement last week to turn over to federal authorities in Washington the names of 250 wealthy Americans suspected of using secret UBS offshore accounts and entities to evade taxes.

UBS reached a $780 million deferred-prosecution agreement to settle accusations that it used undisclosed offshore private banking services to help wealthy Americans evade taxes. But the bank is still under scrutiny by the Justice Department, which is seeking to force it to disclose the names of the 52,000 American clients it suspects may have evaded taxes.

Mr. Rued could not be reached for comment.

[This is the full article.]

Labels: Switzerland, tax havens, taxation, the rich, UBS

 

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2/25/2009 11:01:00 AM 0 comments