Wednesday, July 29, 2009

IRS Goes after Swiss Bank Accounts of Tax Evaders

We have all heard the stories about rich people hiding their money in secret Swiss bank accounts. Well, that may no longer be possible, as least when it comes to evading U.S. income taxes.

In a lawsuit filed by the Internal Revenue Service ("IRS") and the Department of Justice ("DOJ"), the U.S. Government is seeking to compel the Swiss bank UBS to turn over information on 52,000 American depositors, whose accounts hold approximately $14.8 billion U.S. Dollars. The prosecutors will be seeking "John Doe" summons, ordering UBS to turn over information about unidentified U.S. taxpayers believe to be UBS depositors.

This case has caused a large diplomatic stir. Swiss president Hans-Rudolf Marez made a statement to assure the public that Switzerland's banking secrecy remains intact. The case was originally set to go to trial on July 13, 2009, but Judge Alan S. Gold continued the trial date to August 3, 2009 to allow parties an opportunity to settle. Judge Gold ordered the IRS and the DOJ to consult Obama administration on how far the U.S. government may be willing to proceed if UBS will not voluntarily disclose the information on the account holders. In further attempts for diplomatic resolution, U.S. Secretary of State Hillary Clinton and Swiss Foreign Minister Micheline Calmy-Rey are scheduled to meet on Friday, August 1, 2009.

Earlier this year, UBS was facing criminal charges in a separate U.S. tax dispute. UBS settled that case by paying $780 million U.S. Dollars, and turning over information on around 250 American depositors with secret bank accounts. UBS's admissions in the earlier criminal case have supported U.S. Government's demands in the instant civil case.

Switzerland's banking industry has boomed due to its secrecy, and the Swiss are reluctant to give up on that. The recent U.S. cases are unprecedented hits on the famed Swiss bank secrecy. It is expected that UBS will end its cross-border banking operations.

Some of the information in this blog were obtained from articles by The Wall Street Journal, The Associated Press, The New York Times, Reuters, and USA Today. For additional information, run a search on Google.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

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