UK Economy
Tax Avoidance/ Evasion: UK Budget's new rules; US senators want 30 Swiss bankers extradited
By Michael Hennigan, Finfacts founder and editor
Mar 21, 2014 - 7:18 AM

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The US Senate's Permanent Subcommittee on Investigations held a hearing and issued a report entitled "Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts,” on Wednesday, February 26, 2014. The hearing was a continuation of the Subcommittee’s examination of tax haven bank facilitation of U.S. tax evasion, focusing on the status of efforts to hold Swiss banks and their US clients accountable for unpaid taxes on billions of dollars in hidden assets. Witnesses included Brady Dougan, CEO of Credit Suisse, Switzerland's second-biggest bank.

Tax Avoidance/ Evasion: On Wednesday George Osborne, UK chancellor, proposed new rules in his Budget 2014 statement to reduce the opportunities for rich individuals and companies to avoid or evade personal and corporate taxes. Also this week, two prominent US senators wrote to the Justice Department to seek extradition of about 30 Swiss bankers and others who are charged with enabling offshore tax evasion and have not appeared in federal courts.

The UK chancellor of the exchequer told the House of Commons that individuals and companies involved in legal disputes over tax-avoidance schemes will have to pay their disputed bills in advance - - a measure that is expected to boost revenues by £4bn in coming years.

HMRC (Her Majesty's Revenue and Customs) estimates that there are about 65,000 tax avoidance scheme cases outstanding and the tax authority has a win rate of around 80% of all avoidance cases it takes to court.

"It will fundamentally reduce the incentive to engage in tax avoidance in the future," Osborne said of the new rule, which will take effect in July and will apply retrospectively.

"I just think it's inevitable that something had to be done to remove some of the financial incentive to undertake some of these schemes," said Bill Dodwell, head of tax policy at Deloitte. "It will reduce the individuals doing these schemes because if you don't get an immediate cash benefit there's nowhere near so many people who will do a scheme."

The chancellor is also targeting wealthy foreigners who use companies to buy residential properties in the UK, to avoid paying stamp duty.

A 15% stamp duty tax on residential properties worth over £500,000 that are purchased through companies applied from Thursday.

"Many of these are empty properties held in corporate envelopes to avoid stamp duty," Osborne said.

He also proposed a clampdown on companies using complex derivatives to shift corporate profits from one subsidiary of their group to another.

However, he said he would await the results of the OECD's project on devising new international corporate tax rules, before making significant changes in this area.

Swiss bankers

Last month a former UBS AG banker pleaded guilty to conspiring to defraud the United States by helping wealthy Americans evade taxes.

Martin Lack, a 51-year-old Swiss resident, pleaded guilty in federal court in Fort Lauderdale, Florida to a single conspiracy count in a 2011 indictment.

A plea agreement, which provided for continuing cooperation with investigators, included a recommendation that Lack be sentenced to five years’ probation.

Raoul Weil, the 54-year old former head of wealth management at UBS, who was arrested in Italy last October on foot of a US extradition warrant and extradited to the United States in December, is due to face a charge of conspiracy to commit tax fraud. His trial is set for next October.

In 2009, UBS, Switzerland's biggest bank, was fined $780m by the US after admitting it helped Americans evade taxes. It also gave names to US authorities with the agreement of the Swiss government - - this was the first serious breach by Switzerland of its 1934 bank secrecy law that legalised tax evasion.

US senators Carl Levin and John McCain this week urged the Department of Justice (DoJ) to seek extradition of about 30 Swiss bankers and others who are charged with enabling offshore tax evasion and have not appeared in federal courts.

In a letter published on Tuesday to James Cole, deputy attorney general, Levin and McCain say that the department should “at least attempt to use” powers under an extradition treaty with the Swiss.

The letter points to Cole’s testimony that dozens of Swiss bankers and financial advisors have avoided trial on US charges related to tax evasion. Cole testified that the DoJ has not sought their extradition because the Swiss government would refuse.

Levin and McCain write: “The extradition treaty between the United States and Switzerland, however, does not bar the extradition of Swiss nationals who assisted US nationals in the commission of criminal tax evasion, and it is time to test the Swiss government’s professed willingness to cooperate with international tax enforcement efforts.”

Credit Suisse, the second-biggest Swiss bank after UBS, is one of 14 Swiss banks that is currently under criminal investigation in the US.

Kathryn Keneally, an assistant attorney general in the DoJ’s tax division, on Tuesday at a conference in Washington was asked whether the recent guilty pleas of Swiss bankers represented a new trend.

“I would strongly suggest that what you’ve seen in the last couple of weeks is not a recent trend,” Keneally said at the American Bar Association conference. “Things don’t happen overnight.”

The DoJ has also charged 70 Americans for tax evasion from the 4,450 names of evaders provided by UBS.

The bank had 17,000 American clients and the IRS (Internal Revenue Service) gave a choice of voluntary disclosure or the risk of facing a trial.

Selection of Finfacts tax reports 2013/14:

Corporate Tax 2014: Irish Government's "flawed premise" on Apple's avoidance

US company profits per Irish employee at $970,000; Tax paid in Ireland at $25,000

Corporate Tax 2014: Apple's massive tax avoidance revealed in Ireland and Australia

Corporate Tax 2014: White House and Congress to publish US reform proposals

Corporate Tax 2014: US proposal of 17% rate for foreign profits

Irish Corporate Tax 2014: How official spin and distortion works - in short-term

Irish Corporate Tax 2014: Noonan signalls publicity offensive on effective rate

Corporate Tax 2014: Obama running with the hare and hunting with the hounds

Corporate Tax 2014: Yahoo! joins “Double Irish Dutch Sandwich” club; IDA Ireland wants more members 

Corporate Tax: Kenny reassures Facebook but Ireland's rate is too high

Foreign government requests Bermuda to investigate Microsoft's Irish-linked subsidiaries

G-20 Australian presidency focuses on tax "leaking bucket"; Ireland still in denial?

Corporate tax reform and the biggest tech tax havens

Ireland's new International Tax Charter: More political kabuki

Ireland's tax man for Silicon Valley

Corporate Tax 2014: UK's revenues plunge; France considers reform

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