“Americans in Switzerland Working Group” is a new partnership initiative launched jointly by the US Embassy in Switzerland and leaders of American clubs and political organizations in Switzerland, together with other scholars, entrepreneurs and members of the private sector overseas American community. U.S. Ambassador Donald Beyer and consulate, embassy staff taking part
Location: Webster University, Bellevue
Link out: http://www.aca.ch/nu/nu202.pdf
Date: 8 Feb 2012
Start time: 18:00
End time: 21:00
GENEVA, SWITZERLAND – Two new wrinkles appeared Monday 23 January in Swiss media stories surrounding the resignation of Swiss National Bank Chairman Philipp Hildebrand. French-speaking Switzerland’s largest circulation newspaper Le Matin Dimanche yesterday picked up on vague suggestions that have been appearing in German-language media since early January that his wife Kashya, who is American, could have problems with US Fbar (Foreign Bank and Financial Accounts) forms.
And Monday the special commission assigned the task of seeing if Hildebrand respected the central bank’s internal regulations confirmed its 21 December findings: Hildebrand was cleared, although the broader issue of moral responsibility for his wife’s currency transaction profits at a time when he was leading Swiss monetary policy remained.
The former chairman resigned 9 January, saying that he could not prove beyond a shadow of a doubt, once and for all, that it was his wife who had made currency transactions called into question by a stolen copy of a bank statement.
The two-person commission mandated by the Federal Council, the director and vice-director of the Swiss Federal Audit Office, Kurt Grüter and Michel Huissoud, reported to the Swiss government cabinet last week that after reviewing evidence they had not had access to earlier, e-mail exchanges between Hildebrand and Banque Sarrasin, they confirmed their previous conclusion that the chairman had stayed within the rules of the SNB.
Hildebrand case provides Swiss political fodder
The Hildebrand resignation has remained in the limelight in Switzerland, largely because the major political parties have been meeting during the past week to prepare their strategies for upcoming popular votes. The information about Hildebrand’s wife’s currency deal was broken to media by Christoph Blocher, former head of the right-wing UDC People’s Party, who last week talked about the affair for the first time, in an address to the party’s annual meeting.
It turned out, after Hildebrand’s resignation, that the most damning document shown to media was in fact several patched together by a lawyer and politician who is close to Blocher.
ZURICH, SWITZERLAND – The SonntagsZeitung, a Sunday newspaper that has often revealed political secrets, with a mixed track record for getting them right, reports today that 11 Swiss banks are being offered agreements by the US government similar to the one reached in 2009 with UBS, the country’s largest bank. The agreement reportedly would have the banks turning over, via the federal government, names of bankers, correspondence with clients and more as part of requests for administrative assistance.
Such requests are currently covered by the new (2011) Swiss-US double taxation treaty, which parliament is now reviewing, but the details as described by the Zurich newspaper go well beyond what some in Switzerland consider legally acceptable, given Swiss banking secrecy laws.
The Swiss government has said in the past month that it is talking to the US about an agreement, but for all Swiss banks, to end the piecemeal approach used by the US to date to uncover offshore assets hidden by wealthy Americans.
The story appears to be related to talks between the two governments Friday, but Reuters today notes that Mario Tuor, spokesperson for the Swiss State Secretariat for International Financial Matters, said Friday that this meeting was part of the scheduled and still ongoing talks.
Background story, GenevaLunch, 13 December 2011
Swiss president says concern over legality of UK, German deals is EC’s “internal” problem
Swiss President Micheline Calmy-Rey in Geneva 28 November
GENEVA, SWITZERLAND – Switzerland is looking for an agreement with the US that will draw a line on the past, where banks and US tax fraud or evasion is concerned, Swiss President Micheline Calmy-Rey said Monday 28 November. It should include an agreed method for the US to collect tax money in the future while Swiss banking secrecy laws are respected.
“We don’t want to be a place for people who are trying to evade taxes. But we want to sort out past issues, once and for all, and put some order into [things],” she said, referring to ongoing problems between Swiss banks and the US tax arm, the IRS.
“And in the same agreement, we want to deal with the future,” for example through the kind of withholding tax agreement Switzerland struck in August with German and the UK.
“That, in essence, is our position, and it’s the same as it was with the UK and Germany.”
Her remarks were made at a press conference in Geneva Monday afternoon, 28 November where the president was presenting an overview of International Geneva, and its growth in size and importance in the past decade. She earlier attended the opening of the International Conference of the Red Cross and Red Crescent in Geneva.
EU tax commissioner suggests to UK paper the EU might sue Britain
Switzerland, under the UK and German agreements, which have yet to be ratified, is to collect withholding taxes on transactions by financial institutions, then turn over the money to the other countries without divulging the name of the account owners.
But European Union Tax Commissioner Algirdas Semeta told the Financial Times in an interview published Monday morning that he believes Britain and Germany went too far in signing their own bilateral tax agreements with Switzerland. The FT writes that:
“Brussels is threatening to sue Britain unless ministers significantly alter a landmark tax deal with Switzerland, in a dispute that will cast doubt over the £4bn to £7bn of expected proceeds for the Treasury. European Commission lawyers concluded that the bilateral deal, which recovers billions of unpaid taxes in return for protecting the prized secrecy of the Swiss banking system, is in breach of European Union laws that are tougher on tax evasion.”
Micheline Calmy-Rey, Swiss president
Calmy-Rey says this is an internal matter for the European Union, and it’s not for Switzerland to comment on who is competent in this area, the EU or its member states.
Switzerland and the European Union have a tax agreement covering “taxation of savings income in the form of interest payments”, signed in 2004 and revised in 2008 and again in January of this year.
The FT reports indicates that the EU’s pressure on Britain and Germany to renegotiate their deals with Switzerland is causing some friction.
Whether or not Switzerland would be open to new negotiations remains unclear, although the Swiss Bankers Association CEO Claude-Alain Margelisch said last week that “our view is that there can be no renegotiation” and the organization’s priority is to see that all parties are convinced that the agreements are true and fair compromises.
US talks could create new agreement, but form is still unclear
The US-Swiss talks are widely expected to be completed within weeks if not days, but the ultimate form an agreement might take is not yet clear, Mario Tuor, spokesperson for the Swiss Federal Tax Office told GenevaLunch Monday evening. The two countries have a treaty dating back to 1996 that covers tax fraud, still in place, and a new treaty covering tax evasion, which goes before the Swiss parliament in December 2011.
Tuor repeated Calmy-Rey’s assertion that Switzerland also wants an agreement which covers the banks not currently being investigated by the US Justice Department for helping Americans evade US taxes. “The form [it would take] is not yet clear. But it is clear now that we will not need a parliamentary agreement,” which a treaty would require. “We won’t need an agreement that calls for a treaty because it will be based on existing law.”
Switzerland and the US signed a treaty in 2009 that covered an American request for assistance with UBS 4,450 bank accounts, whose owners had not been identified, thus putting the demand outside the existing legal framework.
The talks are raising questions among many Americans who live overseas and who are grappling with the implications for them of tax reporting changes that were designed to prevent fraud by wealthy Americans who live in the US and have offshore accounts.
Credit Suisse, Zurich
ZURICH, SWITZERLAND – US-based private clients of Swiss bank Credit Suisse will no longer be able to do offshore banking with the company, in a move that may signal one of the first steps by an international bank to deal with Fatca (Foreign Account Tax Compliance Act), new US financial regulations that are expected go into effect in 2014, although the bank emphasizes that the decision was taken as part of broader measures to streamline the bank’s operations.
Credit Suisse is folding its Zurich-based Private Advisors (CSPA) unit, a legally separate entity with 10 “relationship managers”, into its much larger US-based Private Banking unit, which has some 400 relationship managers.
Worldwide, the bank has 4,000 private bankers, half of whom are in Switzerland, Zurich newspaper NZZ reports.
Private Advisors is a Swiss securities dealer that is registered both in Switzerland and in the US as a broker-dealer and investment adviser.
The move was made primarily for cost-reduction reasons and to serve US clients onshore, spokesperson Alex Biscaro told GenevaLunch. “You can tell, just by looking at the number of managers, the cost [of running the unit]. You have to make sure that all the employees know all US laws”, including state laws for the client’s area of jurisdiction, he notes. A unit like this “probably needs to have a certain size”.
CSPA has always been small because it was created to provide a niche product for a niche client group. Clients were domiciled in the US and the idea was to offer them an offshore product, says Biscaro.
The bank has changed its strategy in the past decade, however, he notes, saying that the bank began to “exit offshore trading in 2008″.
ZURICH, SWITZERLAND – Renzo Gadola, former UBS wealth management senior banker, was given a sentence of five year’s probation last week in Florida after he was earlier found guilty of helping wealthy Americans evade US taxes by hiding their assets in offshore accounts.
It came out in a court document, “Motion for Downward Departure From Sentencing Guidelines“, filed 15 November that he cooperated with investigators by recording meetings with clients as well as turning over the names of other bankers who are suspected of criminal activity. The document requested that he be treated leniently in sentencing because of his cooperation.
Gadola began to work with investigators shortly after he was arrested, the document notes. He is credited by US media with leading US Justice Department investigators to other bankers who have reportedly helped clients defraud the IRS through Swiss banks. The information he supplied showed for the first time that cantonal banks in Switzerland may also have been involved in hiding US clients’ money.
Former UBS banker “wishes to continue” working with US Justice Department
Account holders domiciled abroad must ensure someone is designated as a contact in case of litigation
BERN, SWITZERLAND – US citizens with Swiss bank accounts who are domiciled in the US and who have not clearly designated, in the bank’s files, a representative who can be contacted on their behalf ad litern (in case of litigation) might want to remedy the situation before the end of November. At that point a new amendment to the ordinance covering the Swiss-US double taxation treaty goes into effect. It is designed to “ensure that the procedural rights of affected persons domiciled in the United States remain guaranteed even if administrative assistance requests are submitted based on certain patterns of behaviour”.
It also puts the onus on account holders to make sure someone can be officially notified if an account comes under suspicion by the IRS and the US makes a request for administrative assistance to Switzerland.
Swiss banking privacy laws do not allow banks to turn over data until the federal government’s tax office orders them to do so, if the US request meets criteria set out by the 1996 treaty.
Requests will in future be published in the Swiss Federal Gazette, and owners of accounts who are not named, or their representatives, will have 20 days from date of publication to appeal the Swiss decision, before the data is turned over to US authorities.
ZURICH, SWITZERLAND – Sonntagszeitung in Zurich has reported, citing an unnamed source, that Credit Suisse is handing over client data for 130 customers to the Swiss government, at the request of the American tax service, the IRS. The federal government, which has demanded that the bank turn over the names immediately, according to the Swiss weekly, will review the names and data, and provide them to the US tax authorities once it decides they meet the criteria required for Switzerland to provide administrative assistance to the US.
Swiss procedure allows the clients a chance to appeal, a process that could well mean it takes several months for the IRS to obtain the information.
Credit Suisse has so far not confirmed the Swiss weekly publication’s numbers. Last week it said it was informing clients who are affected by the move.
In the sights of the IRS, but part of a much bigger picture
BERN, SWITZERLAND – Americans who create offshore shadow companies or foundations, clearly to avoid taxes and with the active help of a Swiss bank, could see their financial information shared with the IRS even if the US tax authority cannot provide their names, if parliament accepts recommendations of the upper house foreign affairs commission.
The commission agreed Thursday 10 November, in a 7 to 3 vote, to an amendment to the new double taxation treaty with the US, which parliament will consider in December. The amendment would allow group requests to be made: bank data could be given to US authorities without the US first providing a name and account number, in a very limited number of cases.
US, Swiss seek global bank solution, sooner rather than later
Meanwhile, the investigation into 11 Swiss banks by the US Justice Department continues. The US and Switzerland have been in talks for some time to find what Mario Tuor, spokesperson for the Swiss Tax Office calls “a global solution for all banks.”
There is no timeframe for finding such a solution, an official who asked not to be named has told GenevaLunch, but both sides say they want a solution sooner rather than later.
Switzerland has “made no offer to the US” over 11 banks
Tuor told GenevaLunch that Switzerland has made no offer for a lump sum payment, contrary to a Reuters “exclusive” story 3 November that mentioned a multibillion dollar settlement. Another Reuters reporter later quoted Tuor as saying Switzerland has not made an offer as part of the talks. He clarified to GenevaLunch Friday that no offer has been made by the Swiss, period.
In fact, says one official,who concurs, saying Switzerland has not made an offer, some people close to the case have discussed figures but these are far smaller than the several billion that Bloomberg and later, Reuters, mention.
The Reuters reporter in New York has qualified the Credit Suisse investigation by the IRS as part of a showdown between the two governments—a statement at odds with the Swiss government’s insistence on including in the new treatment the clarification that group requests can be made under some circumstances. “The move by the two Swiss banks to disclose American client names and account information is the latest event in a showdown between Switzerland and the United States over the withering tradition of Swiss bank secrecy,” according to reporter Lynnley Browning, who covers accounting and tax stories from the US for Reuters.
Browning repeated today, as news, information she says she gleaned a week ago from unnamed US “sources briefed on the matter”—despite it later being flatly denied by the Swiss government to another Reuters reporter in Zurich. Lynnley Browning, who has written articles for the New York Times in the past, frequently pitting the US against Switzerland as adversaries, writes 9 November that:
“Switzerland is trying to craft a deal with the United States that would cover its entire banking industry of some 355 banks. Switzerland had wanted a deal that covered accounts dating back to early 2009, when UBS AG , Switzerland’s largest bank, averted indictment and reached a $780 million deferred-prosecution arrangement with US officials. But the two letters from Credit Suisse and Clariden Leu suggest that US authorities are unwilling to accept a deal that would start with 2009 rather than the January 2002 date cited in the letters.”
Credit Suisse letters sent to clients at gov’t behest
Credit Suisse and its subsidiary bank Clariden Leu, this week sent out letters to some clients warning that their names will be turned over to the IRS, with Swiss government support, as a result of the investigations. Bloomberg reports that
“The IRS sought data for accounts owned through domiciliary companies in which clients are the beneficial owners, according to the letter. The Swiss Federal Tax Administration issued an ‘immediately executable’ order to the Zurich-based bank, which has no right to appeal, according to the letter. Taxpayers can consent to the SFTA handing over their account data to the IRS, or they can use the Swiss legal system to appeal a ruling by the SFTA that their account must be given to the IRS, according to the letter.
“‘Please be advised that Credit Suisse is not able to provide any information on whether or not information with respect to a specific account will be provided to the IRS,’ according to the letter, signed by managing directors Michel Ruffieux and Stephan Gussmann.”
The banks’ moves are being reported by some media outside Switzerland as a breakdown in Swiss bank secrecy but the information in the letters doesn’t reflect a change in practice which is based on the old 1996 tax treaty that allowed some group requests; the US reportedly has gleaned enough information from other cases to find patterns of fraud at 11 Swiss banks.
Catching major tax evaders in the future
Some US media are also incorrectly reporting that the amendment to the new treaty provides for an “automated” process. The treaty would simply clarify that some group requests could be accepted by Switzerland, a feature of the old 1996 treaty. The US is the only country to have such an agreement with Switzerland, according to Swiss officials.
“Tax fraud and the like” includes some cases of tax evasion
A significant change in the new treaty is that it will allow the US to request assistance in some cases of tax evasion and not just fraud.
The Federal Justice Department published a statement 31 March 2010 about the “amending protocol” of the new treaty that parliament will consider in December, noting that it “permits Switzerland to provide treaty assistance in cases not only of tax fraud, but also of continued and serious tax evasion.”
The commission included, in August, the preamble (see text) requested by the Federal Council that explicitly authorizes for the first time judicial assistance in a limited number of cases where American requests do not include a name and address. But there is a clear rider: the requests must be “proportionate” and “practicable”.
In other words, Bern continues to insist, fishing expeditions or mass requests for information are specifically ruled out. Switzerland remains firmly opposed to this, citing Swiss banking laws that protect privacy.
The amendment notes that the US must provide evidence of a “pattern of flagrant” behaviour and of a very serious effort either to defraud or to evade taxes involving “large sums of money”.
Amended treaty doesn’t provide catalog of suspicious behaviours
A minority of the foreign affairs commission called for a catalog of catalog to be drawn up that specifies what behaviour constitutes a pattern and is therefore considered suspicious and what is not, but the commission in the end voted against this. Le Temps in an article Friday morning points out that this could create legal problems in the future.
The amendment would apply only to the agreement with the US and not to other double taxation agreements, the commission’s chairman said Thursday evening.
The next step is for parliament to consider the commission’s recommendation, which calls for the treaty to be approved, with the amendment included.
The commission also recommended that parliament approve nine other double-taxation agreements as they stand, including those with France and the UK
Swiss federal government timeline of the UBS case and the double taxation treaty with the US
ZURICH, SWITZERLAND – Two client advisers who have worked for Bank Julius Baer were indicted by a New York court this week for helping 180 American clients hide $600 million in Swiss bank accounts that were never declared to the US tax arm, the Internal Revenue Service (IRS). The indictment refers only to Swiss Bank 1, but Julius Baer, in a statement received by financial media, has said one is a former employee and the other currently works for the bank.
The indictment, U.S. v. Casadei, 11-cr-866, U.S. District Court, Southern District of New York (Manhattan), names them as Daniela Casadei and Fabio Frazzetto. It is not clear if either of the two are in the US at the moment. The indictment mentions a number of unnamed colleagues who helped them, according to Reuters.
Julius Baer has been actively involved in Swiss-US tax negotiations, the wealth management bank notes in a statement 12 October, e-mailed to financial media: “The bank is one of a number of Swiss financial institutions supporting the ongoing tax negotiations between the US and Switzerland and is cooperating with the US government investigation.”
The indictment is not a total surprise, says a number of people interviewed by US and UK financial media, since the US government has made it clear that a number of Swiss banks are under review for their possible role in cases of tax fraud by US citizens.
Business Week reports that some of the 30,000 Americans who used the IRS voluntary disclosure programme have been interviewed by the Justice Department as it builds new criminal cases.
GENEVA, SWITZERLAND – Canada’s finance minister has come out loudly against new US tax laws that will increase reporting requirements to the IRS, the US tax arm, for dual citizens, as well as recently stepped-up efforts by the IRS to obtain tax information about Americans in Canada.
The IRS efforts to chase tax cheats are netting another group, he says, with “the threat of prohibitive fines for simply failing to file a return they were unaware they had to file is a frightening prospect that is causing unnecessary stress and fear among law abiding hardworking dual citizens,” he said in a letter sent to several major US publications 19 September.
He noted that “their only transgression is failure to file the IRS paperwork they were never aware they had to file.”
Canadian media have made their government’s resistance to the US moves headline news this weekend, as concern grows in Canada and elsewhere outside the US over the new Fatca (Foreign Account Tax Compliance Act) rules, expected to go into effect in 2014. Fatca will require financial institutions outside the US to provide information on accounts held by US citizens and green card holders.
CBC, Canadian public broadcasting, quote Flaherty as saying he shares the concerns of fellow citizens over the reach of the IRS beyond US borders (http://www.cbc.ca/fp/story/2011/09/16/5413714.html).
Swiss banks have reacted to the proposed Fatca rules by, in many cases, closing accounts of US citizens and refusing to open accounts for Americans resident in Switzerland because Fatca regulations will be at odds with Swiss banking laws.
US media, meanwhile, have been publishing the news that some 12000 taxpayers took advantage of the most recent tax amnesty by the IRS, which ended 9 September, noting that the IRS has so far collected $500 million in back taxes and interest.
An AP news agency article picked up by the CS Monitor, Yahoo news and scores of US newspapers, with a headline “12,000 tax cheats come clean under IRS program”, doesn’t mention that the amnesty encouraged many who were unaware of the FBAR reporting requirements to file forms that require taxpayers to show the largest amount in all financial accounts during every tax year. The fines for not reporting were as high as 50% of any unannounced holdings.
The Fbar requirement was designed as an anti-terrorism tool, to catch money launderers, and is not overseen by the IRS itself.
American Citizens Abroad has been actively working to inform taxpayers about these obligations, but discussions on their website and town hall meetings organized by ACA have made it clear that several IRS filing requirements have been little known and poorly understood by the public.
US approach contrasts with German tax collection deal
ZURICH, SWITZERLAND – There is not an official war open against Swiss banks, by the US Department of Justice, but continuing skirmishes, highlighted this week by Le Temps and the Financial Times, make it clear that peace is not around the corner, either. Officials from the two countries appear to be heading for another showdown, writes Zurich-based Haig Simonen at the British newspaper, just as Switzerland and Germany are on the verge of announcing that they have found a way forward with a similar problem of German citizens hiding money from their taxman in Swiss bank accounts.
Switzerland and Germany are expected to announce Wednesday 10 August that they have signed an agreement for the Swiss to withhold tax on Germans’ bank accounts in Switzerland while Swiss banks will pay a lump sum up front for tax revenues lost in the past by Germany. The new agreement would leave Swiss banking secrecy intact by Switzerland turning over the taxes collected without identifying account owners.
The New York Times describes the new agreement, as well as an upcoming one with Britain as putting a squeeze on tax evaders, in an article published late Tuesday.
The US is taking a more aggressive tack to uncover past tax cheats and a 2009 treaty with Switzerland covering a set number of accounts held by Americans at bank UBS looks increasingly like a one-off settlement. The DOJ 4 August announced yet another indictment, this time against Gian Gisler, a former UBS banker who left the company in 2008 and who now lives in Zurich. His indictment follows four against former Credit Suisse senior managers in late July that topped up four other ex-Credit Suisse indictments in February 2011.
According to the DOJ “While working at UBS and at two other Swiss asset management firms, Gisler had more than 38 U.S. taxpayer clients and allegedly opened and/or managed more than 60 hidden accounts on their behalf. Gisler left UBS in 2008 when it became public that UBS was the target of an IRS investigation, and moved to a Swiss asset management firm so that he could continue to assist his US taxpayer clients in hiding their accounts at other Swiss banks. When that firm ceased its private banking business, Gisler left for yet another Swiss asset management firm so that he could continue to engage in the same conduct.”
The Financial Times says six other banks, in Switzerland and Liechtenstein are now being investigated by the DOJ. “The US investigations have taken months to gather pace. But receipt of the names, along with thousands of voluntary self-declarations by US taxpayers, has widened the scope of the US inquiries. Although only 25 US taxpayers with undeclared Swiss accounts have been indicted so far – and the first case dates back to April 2009 – the pace is beginning to build.”
Zurich, Switzerland (GenevaLunch) – Hans Baer, scion of the Baer banking family in Zurich died Monday 21 March, age 83, the family announced Tuesday, and with him disappeared a period in Swiss banking history. He was the father of Raymond Baer, chairman of the Board of the Julius Baer Group.
Hans Baer ruled over the family business, one of Switzerland’s most successful private banks, for nearly 30 of the 50 years he worked for the firm, as president of the Executive Board and then chairman before his retirement in 1996. He oversaw the bank’s opening of offices in New York and London. He also oversaw the first public offering of shares, not a surprise given that years earlier, in 1983 when I, as a young reporter working for Time Magazine interviewed “Papa Baer” (and he looked the part, charming and warm and larger than life), he told me that this was where the future of his bank would lie.
The bank later went public and is now listed on the Swiss Stock Exchange as a member of the SMI group of top 20 companies. It is Switzerland’s third largest bank.
Hans Baer was also well known for his active involvement in the arts and for his dynamic contributions to his hometown of Zurich. He was the founding president of the Zurich Festival, among his many projects.
Waving less bravely
Bern and Geneva, Switzerland (GenevaLunch) – US State Department figures for 2010 confirm what many Americans who are long-term residents in other countries have suspected: the number of US citizens giving up their citizenship is on the rise. The figure was 1,485 according to renunciationguide.com, but Bloomberg lists 1,534. In both cases, the 2010 figure appears to be about double that for any year since 2003.
Renunciationguide.com, a site maintained by and for people considering giving up US citizenship, points out a number of errors in the figures and notes that clear records are not published, and that it is safe to assume the figures are higher based on inter-agency discrepancies.
The US began, in 1996, publishing in The Federal Register the names of those who renounce, and from this readers calculate the numbers.
The figures reflect completed requests, not demands and there are long waiting periods at some embassies, with Bern, for example, taking appointments for August 2012.
The number of people rose despite an administrative fee of $450 imposed in July 2010. Renouncing citizenship had previously been free of charge.
“The UN Universal Declaration on Human Rights recognizes the right to leave one’s country and to change one’s nationality, but it’s not US law,” notes renunciationguide.com.
New passport remark links passport applications to the IRS for first time
The line may grow longer, as embassies begin to provide new forms published in December 2010 for renewing US passports, which state clearly for the first time, as part of the Privacy Act information, that data will be provided (italics GenevaLunch) to the US treasury, where the IRS tax office is housed:
“Your Social Security Number will be provided to Treasury, used in connection with debt collection and checked against lists of persons ineligible or potentially ineligible to receive a US passport, among other unauthorized uses.” (2008 form, identified by the DS-82 and 02-2008 in the lower left corner, still on some US embassy web sites, and the new 2010 form)
Click on image to view larger and compare the Privacy Act Statements
The same is true for new passport applications: DS-11 from 2008 and from 2010.
The new forms include several other changes and should be read carefully by anyone applying for or renewing a US passport.
The US goverenment does not allow its citizens to renounce citizenship to avoid paying taxes, but people with dual citizenship may find the passport change to be a deciding factor in keeping just the other nationality.
US citizens with assets and income above a certain level have long been considered to give up their citizenship for tax purposes whether or not they have other reasons, as a 1998 Senate Finance Committee report stated, and the law has not changed (ed.note: figures are from 1998):
“Any individual with a net worth of $500,000 or more (adjusted for inflation) on the date of expatriation or who has an average annual net income tax liability for the five years preceding expatriation of $100,000 or more (adjusted for inflation) is irrebuttably presumed to have expatriated for tax-motivated reasons . . . and thereby is subject to tax under section 877 regardless of actual intent. All expatriates are required under the Code to provide upon expatriation a statement indicating residence and citizenship. In the case of expatriates with gross assets having an aggregate fair market value in excess of $500,000, a detailed statement of assets and liabilities is also required.”
The law has eased somewhat, however, and in 2008 a requirement was dropped that obliged wealthy former citizens to file US tax forms for 10 years after giving up citizenship, Bloomberg points out in an article on the growing number of people giving up their citizenship.
Tax compliance and long waits slowing down renunciation process
For those who want to join the line to “renounce” citizenship, as Washington labels the process, an added complication is proof that a person is “compliant” where US taxes are concerned. The issue for these people is rarely fraud, but the complexity and cost of becoming compliant.
Non-compliance may be due simply to the fact that “It’s a daunting and complex task to file a ‘resident’ US tax return, and non-residents have to further complete a foreign tax credit computation and filing. Also, some of the common software tools like Turbo Tax haven’t allowed users to file electronically with a foreign address. Finally, most people have already had to file taxes once in another country, so it’s double the work,” says Gregory Dean of US Tax in Geneva.
A translator in Paris explained to GenevaLunch why he did not file US taxes for the first 20 years of his adult life.
Home sweet home, but don't ask a bank outside the US to finance it, if you're an American citizen
Geneva, Switzerland (GenevaLunch) – The strange case of John Doe, US citizen who lives in Switzerland and can’t open a local bank account or keep one, is now catching the attention of Swiss media.
Le Matin Dimanche (available online only to subscribers) ran a full-page article Sunday entitled “American clients ejected by Swiss banks”, which focuses on the impact on Swiss residents with US connections, of the new US Fatca law, signed into law in March 2010. It goes into effect in 2013.
The newspaper’s argument is that Swiss banks are no longer accepting Americans who live in Switzerland as clients, a fact born out by some of the nearly 80 personal stories from around the world registered with ACA (American Citizens Abroad), as well as numerous anecdotes that GenevaLunch has collected.
David Treitel, a tax specialist quoted by Le Matin, says that 20 percent of his US clients have had to change banks.
The article has some flaws in its details: it says there are 10,000 US citizens in the Lake Geneva region and 30,000 in Switzerland, while the number is most likely considerably higher because dual citizens in particular but also many long-term residents in Switzerland do not register with the US Embassy, and the Swiss government does not issue figures.
Renouncing citizenship is a long process
The newspaper also states that there is a six-month wait for appointments to renounce US citizenship, for dual nationals who are taking that route to dealing with the growing problem of being American outside the US. But when GenevaLunch recently checked, the US Embassy was taking appointments for May 2012, 15 months away, and the waiting list in some other countries is equally long.
Other disincentives appear to be at work, such as insisting that citizens come in for a first interview, then return weeks later for a second meeting, costly for anyone at a distance from an embassy.
Nevertheless, Le Matin has drawn Swiss attention to a growing problem for a key group of foreigners in the country, where 22 percent of the population is foreign. The impact is not limited to US citizens: it covers anyone who has held a US Green Card as well, and nor is it limited to these groups living in Switzerland since it touches anyone outside the US.
Fatca’s deep, wide net will catch far more than fraudsters
Fatca is designed primarily to catch people who are illegally avoiding paying US taxes, but the net has been thrown wide and deep, prompting ACA to formally contest the legislation as details were drafted in 2010.
“Fatca aims to go after tax evaders by requiring massive reporting to the IRS on two fronts–first from all foreign financial institutions taken in the largest sense of the term and secondly from all US persons who have a foreign bank account, foreign investments or foreign trust,” the non-partisan group argues on its web site.
“This means that all US citizens residing abroad, who necessarily have a foreign bank account, will have to report on their 1040 all assets held in foreign institutions.” Congress has “created a reporting monster with Fatca,” argues the ACA. “It will cost billions of dollars for foreign financial institutions to comply and it will significantly increase the reporting compliance costs of individual US citizens residing abroad.”
The numerous provisions include:
- impose a 30 percent tax withholding on payments either to foreign banks and trusts that fail to identify US accounts and their owners and assets to the IRS, or to foreign corporations that do not supply the name, address, and tax identification number of any US individual with at least 10 percent ownership in the firm (effective for payments made after December 31, 2012)
- impose penalties as high as $50,000 on U.S. taxpayers who own at least $50,000 in offshore accounts or assets but fail to report the accounts on their annual income tax return (effective for tax years beginning after the date of enactment)
- levy a 40 percent penalty on the amount of any understatement attributed to undisclosed foreign assets (effective for tax years after the date of enactment)
- allow the Treasury Department to presume that a foreign trust has U.S. beneficiaries if a U.S. person directly or indirectly transfers property to the trust (effective for transfers of property after the date of enactment);
- establish a $10,000 minimum failure-to-file penalty for some foreign-trust-related information returns (effective for notices and returns due after December 31, 2009).
The ramifications of the new Fatca legislation are only beginning to be felt, with Swiss banks and other financial institutions, including PostFinance, refusing at least some services, if not all, to clients.
One man who is getting close to retirement tried to move funds to a PostFinance account but was told that as an American investment funds are closed to him. PostFinance, as an arm of the Swiss government, which must legally respect Swiss banking secrecy laws, may have a tough time complying with Fatca legislation. Smaller banks, including regional banks, have said the cost may be too high.
ACA is seeking testimony from US citizens who have had trouble opening or keeping their non-US bank accounts.
Passport application data will go to the IRS
American citizens who until now have hoped the passport application office and the IRS would continue to ignore each other while they try to understand the implications of the new legislation, or to become compliant with filing requirements they have learned about only in the past year or two, will be surprised to see the latest version of the passport renewal or application form.
It makes it clear that a social security number is needed by the government, and that the IRS will have access to passport form data.
UBS and Credit Suisse, with substantial commercial operations in the US, appear likely to comply with Fatca, but they are already known to have refused several US citizens as private clients.
Some US citizens, such as one who recently moved to eastern Switzerland, have had no trouble opening a Credit Suisse current account, but the bank knew she was a long-term employee for a major Swiss multinational. Her spouse, without that corporate guarantee, is unable to have a bank account of his own and the couple were unable to open a joint account.
The path to the bank’s door was smoothed by a relocation agent, who is Swiss, and was pointed out to the bank that this was a local hire, with a big company behind it. The agent insisted that the American understand her US tax obligations, in particular the FBar filing requirement, to the point where she worried about sending it, unregistered, to a post office box in the US, the only address the Detroit office supplies.
Buying a home or investing through her Swiss bank may not be options, although the bank has not said there are restrictions, but at least if she is turned down she will know in advance, unlike US citizens with mortgages and retirement funds who have been told their accounts are being closed by their local, long-term banks, which happen to be Swiss.
ACA is holding its annual gala auction in Geneva 18 March 2011.
ACA is seeking testimony from US citizens who have had trouble opening or keeping their non-US bank accounts.
Geneva, Switzerland (GenevaLunch) – The head of a Geneva-based hedge fund company, Edward Gurary, CEO of Dighton Capital Management, has pleaded guilty in the US to not declaring to the IRS (US tax arm) funds held at Swiss banks, including Credit Suisse. The US Department of Justice announced the news in a press release issued late Tuesday 8 March.
Gurary was named 23 February in a DOJ investigation. His office told GenevaLunch at the time that he was on vacation and unavailable for comment.
The latest statement, with Gurary’s admission of guilt, lays out how the financier hid the funds he failed to report; at the time he was living in Ohio, in the US. He moved to the Geneva region in 2010.
“Gurary admitted that from approximately 2002 through 2008, he owned and controlled a financial account at UBS AG which was in the name of a Bahamian entity called Demko Ltd. and which contained balances ranging from $490,000 to $947,000. Gurary controlled transactions in the Demko account by sending faxes using a code name “Vanda” to UBS from an OfficeMax store in the Cleveland area rather than his home or business. UBS would in turn send his requests for authorizations to officers of Demko in the Bahamas in order to make it appear that Demko owned and controlled the account. During the prosecution years, interest was paid by UBS into the Demko account, in amounts ranging from $3,400 to more than $21,000, all of which Gurary admitted he failed to report on his tax returns.”
Credit Suisse, Zurich
Zurich, Switzerland (GenevaLunch) – Four bankers who work for Credit Suisse have been indicted in eastern Virginia in the US on charges of conspiring with other bankers to defraud the US government, its justice department and the IRS tax arm of the government. The Department of Justice (DOJ) press release does not name the bank, but Credit Suisse has confirmed the information to TSR, Swiss public television, and other Swiss media.
The four include a Geneva banker, Marco Parenti Adami, and three others, Emanuel Agustino, Michele Bergantino and Roger Schaerer.
Parenti Adami is a senior manager whose several duties include responsibility for North American clientele for French-speaking Switzerland at Credit Suisse, where he has worked for 17 years.
The DOJ statement says:
“According to the indictment, the defendants and their co-conspirators solicited U.S. customers to open secret accounts because Swiss bank secrecy would permit them to conceal from the IRS their ownership of accounts at the bank and other Swiss banks. It is further alleged that they provided unlicensed and unregistered banking services and investment advice to customers in the United States in person while on travel to here, including at the international bank’s representative office in New York City and by mailings, e-mail and telephone calls to and from the United States.
“The indictment further alleges that the defendants and their co-conspirators caused U.S. customers to travel outside the United States, to destinations including Switzerland and the Bahamas, to conduct banking related to their secret accounts; opened secret accounts in the names of nominee tax haven entities for U.S. customers; accepted IRS forms that falsely stated under penalties of perjury that the owners of the secret accounts were not subject to U.S. taxation; advised U.S. customers to structure withdrawals from their secret accounts in amounts less than $10,000 in an attempt to conceal the secret account and the transactions from American authorities; and advised U.S. customers to utilize offshore credit, and debit cards linked to their secret accounts and provided the customers with such cards, including cards issued by American Express, Visa and Maestro.”
Credit Suisse, which says it is cooperating with the DOJ in the investigation, insists that it is not the target of the IRS. But the DOJ statement notes that “As of the fall of 2008, the international bank maintained thousands of secret accounts for customers in the United States with as much as $3 billion in total assets under management in those accounts. The conspiracy dates back to 1953 and involved two generations of U.S. tax evaders including US customers who inherited secret accounts at the international bank.”
TSR points out that the case against Switzerland’s other major bank, UBS, began in a similar way, with charges against a small number of bank managers before it escalated into a demand by the DOJ for data on thousands of Swiss bank accounts.
The bankers, if found guilty, could face up to five years in prison and fines of $250,000 each.
Link to other sites: Bloomberg, US Department of Justice, TSR (Fre)
Geneva, Switzerland (GenevaLunch) - The US Department of Justice appears to be stepping up efforts to track cases of tax fraud tied to Switzerland, with two new cases: the arrest in New York of a Credit Suisse banker last week and “information” charges filed in Ohio against a US man who heads a Geneva-based hedge fund company.
Banker Christos Bagios was arrested when he arrived in New York for the start of a two-week trip there, Zurich newspaper SonntagsZeitung reported Sunday, for investigations related to tax fraud. He has been the head of the Relationship Management West Coast Group of Credit Suisse Private Advisors, a wealth management subsidiary of the Swiss bank, but his name no longer appears on the bank’s management team web page.
The Greek citizen joined the bank two years ago, after working for nearly 10 years as a director at Bank UBS in Zurich.
The Department of Justice has not filed charges and it is not yet clear if the investigation is linked to his work at his new company or at UBS, although the NY Times suggests, without backing the statement, that the “highly unusual move signals that the Justice Department is intensifying its scrutiny of Credit Suisse over its sale of offshore private banking services that may have allowed wealthy American clients to evade taxes”.
Both banks have declined to comment to media.
The DOJ lists Bagios as “in transit” and US media report that he is being moved from New York to Fort Lauderdale, Florida, where several tax fraud cases have been heard, including the IRS case against UBS, which was dropped in 2010.
DOJ “information” charges head of Geneva hedge fund company
Update 17 June / ACA is seeking testimonials for a proposed hearing before the US House financial services committee, from people who “have been denied banking services or have had difficulty in maintaining banking services either back in the US while residing overseas or by foreign financial institutions due to your American nationality.” They are asked to visit the ACA web site and leave their testimonial here.
Geneva, Switzerland (GenevaLunch) – American Citizens Abroad (ACA), a Geneva-based international organization that represents the interests of US citizens who reside overseas, has sent a strong message to the US Treasury Department and the IRS tax authority, to say new US legislation discriminates against Americans abroad.
The letter points out “the extremely negative effect” of Fatca (Foreign Account Tax Compliance Act) legislation. The group has been gathering examples of US citizens faced with banks refusing to provide accounts and services to them “because of the overwhelming reporting and compliance requirements,” the group notes in a news release issued Wednesday 16 June.
The ACA letter calls for the exclusion of US citizens who are long-term overseas residents from Fatca reporting, “to encourage foreign banks to maintain banking relationships with the hard-working community of US citizens abroad, who contribute so much to the United States in terms of trade, investments and image.” The group also calls for the complete abolition of US citizenship-based taxation.
The United States is the only country in the developed world which has a system of taxation based on citizenship rather than residence, which ACA argues “systematically penalizes US citizens residing abroad.”
The new regulations, currently being drafted, are part of a larger series of actions by the US Treasury, designed to catch tax evaders. These include the request for judicial assistance from Switzerland in the case of 4,450 UBS bank accounts suspected of being used for tax fraud purposes, which led to the Swiss-US treaty whose fate will be decided in Bern Thursday morning.
The impact of changing tax laws
Geneva, Switzerland (GenevaLunch) - The Tribune de Geneve Thursday 27 May carries a feature story on the impact of the changing US tax collection system on Americans who live overseas, but also on Swiss who have worked in the US.
The article, entitled “US tax collector disgusts many dual nationals in Switzerland”, is linked to the upcoming 7 June debate in Parliament over the US-Swiss tax agreement covering UBS.
The article mentions several of the issues that have come up at US citizens’ meetings in Geneva, such as the 15% exit tax that must be paid by Americans who give up their citizenship, but it also points out that many Swiss who have worked in the US and did not declare income according to new IRS interpretations may be at risk for heavy penalties.
Background, GenevaLunch series on US citizen meetings over tax issues, in Geneva in 2009-2010
Michael Ambuehl meets US press at end of two-day visit
UBS agreement and new tax treaty were on the agenda
Michael Ambuehl, Switzerland's State Secretary for International Financial and Tax Matters
Washington, DC, USA (GenevaLunch) – Switzerland’s new Head of the State Secretariat for International Financial Matters in the Federal Department of Finance Michael Ambuehl Tuesday concluded two days of meetings with a number of high-level US tax, treasury, justice department and foreign affairs officials in Washington. The US-Swiss double taxation treaty and the treaty covering the UBS agreement were on the agenda, Bern said Tuesday evening.
Ambuehl met with US reporters at the end of his visit and said that if the Swiss parliament rejects the agreement with the US over the UBS case, a new legal battle between Switzerland the US would be likely, and the double taxation treaty would also be at risk.
The latter could have major repercussions for Switzerland as a place of business, he noted.
Bern said in a press release issued late Tuesday that:
Geneva, Switzerland (GenevaLunch) - Taxpayers who met with tax and estate planning experts in Geneva Tuesday 4 May complained that the jargon which surrounds US taxes for those who lived abroad is a barrier to filing. Here is a list, by no means extensive, of some of the terms that came up at the meeting. The meeting was organized by US Citizens Abroad.
See GenevaLunch article 6 May: “US taxpayers abroad struggle to make sense of tax laws, lingo.”
Egttra = Economic Growth and Tax Relief Reconciliation Act of 2001, major piece of US tax legislation
Editor’s note: the meeting in Geneva invoked the Chatham House Rule to encourage open discussion, so no names or identities of participants and presenters can be revealed
Geneva, Switzerland (GenevaLunch) - Confusion replaced 2009′s anger and a black mood when a group of mainly Americans gathered in Geneva for the second time in nine months to learn more about their obligations to Uncle Sam’s tax arm, the IRS. US citizens, green card holders and others who potentially owe the American government tax money, or even just forms, met at Webster University Tuesday 4 May to hear from a group of experts what their obligations might be.
The result was an evening that focused primarily on how to invest your money if you live outside the US, in order to avoid problems with the Justice Department or the IRS. An earlier meeting at Webster in September 2009, organized by American Citizens Abroad with support from Democrats Abroad and Republicans Abroad, was held just days before a US amnesty deadline for people to declare foreign assets held abroad. That meeting drew twice as many people and a younger crowd.
The September evening was notable for the shock it gave many who attended, about “non-compliance” issues and the obligation to file an Fbar (foreign assets) form.
This week’s meeting brought together four specialists in tax consulting, estate planning and legal issues. The longer-term focus meant there was less of a sense of panic in the crowd. Speakers offered several surprises about the increasingly complex tax payment system, and 10 of 13 people randomly questioned individually by GenevaLunch in the 24 hours after the meeting characterized it as “depressing”, if helpful.
Taxpayers face confusing changes in rules, application of them
The speakers outlined several problems:
- there are a number of recent and upcoming changes to taxation regulations, most of which appear to be poorly understood by US citizens living overseas
- changes have been implemented in an irregular pattern over time, creating uncertainty for taxpayers
- US citizens abroad are caught in the gap between US banks that don’t want them and Swiss banks that refuse them, adding to mortage, pension plan and others investment dilemmas.
Among the changes
2008: the Heart Act, amended expatriation procedures and includes succession tax – “much discussed but seldom implemented” says one Geneva meeting expert
2009: voluntary disclosure programme, under which 14,500 people took advantage of the amnesty
2010: the Hire Act – gifts, annuities, insurance pulled in for Fbar reporting of foreign assets, but no guidelines have been issued yet about how this will be implemented
Fbar: The Treasury has now gone back to its 2000 definition of who is a US Person for filing purposes, after “going overboard on that” one speaker says, and it exempts some people for some assets in earlier years (IRS notes on the change)
Grats, which cover the transfer of assets of family owned business is being reviewed
The exclusion for gifts to “alien spouses” is $134,000 in 2010 but is dropping to $60,000
Estate tax credit and exemption levels: 2009 applicable estate tax credit was $1.46 million, no estate tax in 2010 and credit in 2011 will be down to $345,8000. Available exemption in 2009 was $3.5 million and in 2011 it drops to $1 million.
“Land of the free – I used to really believe that”
Those attending who said the meeting had depressed them gave several reasons: the difficulty of understanding what one person called the “foreign language of tax jargon” (see “US tax mini jargon buster”), a sense of abandonment by a US government indifferent to the reality of the lives of its citizens abroad, frustration that too many Americans who live in the US wrongly see those abroad as a spoiled group of tax dodgers, and ultimately, a costly and unjust inability to plan.
“The right to plan – isn’t that what someone said the last time?” asked one woman. She was recalling a speaker who argued that under a fair system all taxpayers should have the right to plan for the future, but that current US tax rules make this impossible for many people abroad.
She and others chafed that even tax and estate planning experts fail to understand the needs of US citizens married to people from other countries, who often want little to do with the complex US tax structure.
Bern, Switzerland (GenevaLunch) - The Swiss Federal Council Wednesday afternoon 14 April formally asked Parliament to approve the treaty signed with the United States in August 2009. The treaty is an agreement whereby Switzerland will provide judicial assistance to the IRS, the US tax authority in the case of 4,450 UBS clients suspected of tax fraud.
The message goes to Parliament as the country’s left and centre political parties appear to be lining up to approve the treaty, although the right-wing People’s Party insists that it flies in the face of Swiss banking secrecy law.
Swiss government able to continue checking 4,200 UBS client accounts requested by IRS
New protocol buys gov’t time before Parliament’s vote on new tax treaty
Update 21:15 Bern, Switzerland (GenevaLunch) - Switzerland and the US Wednesday 31 March both signed an “amending protocol” to their 19 August 2009 agreement whereby the Swiss promised to issue final decisions on some 4,450 UBS bank clients whose account information was requested by US tax authorities. The new protocol has the same legal weight as the double taxation agreement between the two countries, which must be approved by the Swiss parliament.
New protocol outweighs old tax agreement, could take precedence over new
It means, according to Bern, that “the UBS Agreement now takes precedence over the older and more general convention, and permits Switzerland to provide treaty assistance in cases not only of tax fraud, but also of continued and serious tax evasion.” It goes a step further, according to the statement issued by Bern.
More Swiss banking news:
- Swiss National Bank and Finma supervisory body will work more closely
- UBS says IRS has eyes on 20 Swiss banks
Zurich, Switzerland (GenevaLunch) - Swiss bank UBS has told Swiss German newspaper Tages-Anzeiger that it sent letters to several Swiss politicians early in the week to encourage them to approve an agreement between Bern and Washington, DC that now goes to parliament for a vote.
Valerie Hunter is suing Sheryl Stack in Austin, Texas in the US, for negligence. Hunter is the widow of Vernon Hunter and Stack is the widow of Joe Stack, who flew his small plane into the IRS tax offices where Vernon Hunter was working. Valerie Hunter’s lawsuit reportedly says Sheryl Stack, who spent the night before the murder-suicide at a hotel, should have tried to prevent her husband’s actions. But her lawyer poitns out that the action is not meant to be vindictive and that Texas law requires that a defendant be named.
Links to other sites: Daily Texan, Houston Chronicle
Andrew Joseph Stack, 53, appears to have flown his Piper Cherokee plane into an IRS (tax authority) building in Austin, Texas intentionally, say authorities in the city, after setting his house on fire 18 February. Two people died in the crash into a building where 200 people work, and two others were injured. Firefighters had contained most of a fire started by the crash but were working during the night to put it out completely. Stack’s web site appears to reflect a long-held grudge against the US government and the IRS in particular.
Alexandria, Virginia, USA (GenevaLunch) - Details are emerging of the case of Dr Andrew Silva, who pleaded guilty 16 February in US District Court in Virginia to “conspiring to impede the United States” and to making false statements. Silva inherited $250,000 from him mother in 1997. The money, never declared to the US tax authorities, the IRS, was in a British-owned bank in Switzerland. The money grew to $268,000 by the time he tried to take the money out in 2009 when the bank said it was closing his account, a time when a number of banks in Switzerland began to close accounts held by US citizens both outside and in Switzerland. to avoid problems with US authorities.
The US Justice Department Tuesday issued a press release on his case, noting that Silva, a nose and throat specialist and surgeon, could face up to 10 years in prison and a maximum fine of $500,000. He was released on his own recognizance.
“We are capable of thwarting offshore banking schemes because of the increased cooperation among ICE, Postal Service, and the IRS,” says Neil MacBride, US Attorney for the Eastern District of Virginia says in the Justice Department release. “The tax charges in this case came to light because agents caught Mr Silva structuring cash to avoid reporting requirements, and that kind of coordination is making it possible for us to discover Americans who conceal their wealth overseas and make them pay for their actions.” Structuring cash is a term that describes bundling a large amount into several smaller ones, all under $10,000, to slip them into the US to avoid detection or without having to declare the money to customs authorities.
The Justice Department points out that “United States law prohibits individuals from structuring mailings of US currency into the United States in amounts less than $10,000 if the purpose of the structuring was to evade the requirement to file a CMIR.” The CMIR form’s longer name is: FinCen Form 105, Report of International Transportation of Currency or Monetary Instruments, and it must be filed with the US Bureau of Customs and Border Protection.
The government’s description of how Silva tried to get the money out of Switzerland:
Alexandria, Virginia, USA (GenevaLunch) - A doctor based in Virginia in the US pleaded guilty Tuesday 16 February to conspiracy to evade taxes. This is reportedly the first IRS (US tax authority) case where a non-US bank other than Switzerland’s UBS is cited as providing advice about how to evade taxes.
