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.
Swiss Finance Minister Merz confirms no automatic data exchanges
Canada initials agreement, France confirms Davos “understanding”
Bern, Switzerland (GenevaLunch) – Switzerland’s push to build up its stable of bilateral tax agreements in line with OECD standards moved ahead last week. Among other moves, a new agreement with Canada was signed, the same day that a Mafia boss in Montreal pleaded guilty to hiding $5 million in three Swiss bank accounts from the Canadian taxman.
Monday 15 February Figaro newspaper in France published a list of 18 countries that France is calling its black list of governments that are not cooperative in fiscal matters, with the bulk of them in Latin America. Switzerland does not figure on the list.
Update 20:25 Bern, Switzerland (GenevaLunch) – The Swiss government will not automatically hand over details of UBS accounts to the IRS, the US tax authority, without giving account owners a chance to defend themselves, Bern announced Tuesday 17 November: if Switzerland’s tax authority decides to turn over information to the IRS, account holders will first be notified and given a “chance to state their case.”
The announcement appears to be at odds with a remark attributed by the New York Times to Douglas Shulman, IRS commissioner, at a press conference held in New York Tuesday. He is reported to have referred to “‘the obligation that the Swiss have taken to the US government to produce 4,450 names’ to the IRS, he said.” But Switzerland says it will review the 4,450 accounts agreed upon and make a legal decision in each case about providing assistance to the IRS.
The Swiss government and the IRS Tuesday separately announced details of the process covered by their agreement, signed in August, concerning 4,450 UBS accounts where the IRS has asked for assistance as it chases tax evaders. Switzerland says the UBS affair will cost the government CHF40 million, with a team of some 40 legal and tax experts working fulltime for a year to decide in which of the cases Switzerland will provide assistance. Additional help from specialists will be called in if necessary.
The IRS’s Shulman also announced that more than 14,700 people had come forward under a tax amnesty that ended 15 October, for non-compliant taxpayers, well over the 100 or so who turn themselves in, in most years. He noted that the IRS case brought against UBS in 2008 will be dropped only if the US tax authority receives the names of 10,000 UBS clients, either through Swiss assistance or by the clients turning themselves in. The taxpayers who took advantage of the amnesty were from several countries and from many banks.
Tax adviser Gregory Dean of US Tax & Financial Services in Geneva Tuesday evening cautioned that “We should not lose sight that the voluntary disclosure programme still exists – the special programme promoted by the IRS closed October 15, but this has created the wrong impression that people can no longer come forward under the voluntary disclosure programme. This programme still exists, though the IRS approach to a post-October 15 disclosure is a little uncertain. What is certain is that voluntary disclosure is not available where the IRS has initiated an investigation of a taxpayer.”
Ed. note: The documents which make up the annex to the agreement between the two countries are available, but only in German, on the federal government’s web site.
Highlights of the agreement
Mixed signals from banks, for US citizens in Switzerland
Updated 01:00 Geneva, Switzerland (GenevaLunch) - Swiss banks have become more cautious in their relations with US citizens in the wake of problems the country’s largest bank, UBS, ran into in 2008 with the IRS over unreported income on the part of some of its clients. GenevaLunch, in a survey of several Lake Geneva area banks, found that without exception the banks say they do not discriminate against US citizens, and they continue to welcome new accounts. Stories nevertheless abound in Switzerland of US citizens who received letters in early 2009 from their banks saying their accounts were being closed – but few of of these people will speak openly about such letters, in part because the IRS tax authority encourages citizens to report on others who are not “compliant” in filing taxes as well as listing all worldwide assets.
US Ambassador Beyer suggests UBS could turn over fewer names
A GenevaLunch reporting team this week spoke with several people to determine the extent to which the personal banking problem is real or a recent urban myth. The team talked to seven of the eight banks which returned its calls and to a number of US citizens resident in Switzerland, as well as with members of American Citizens Abroad (ACA). Some of those interviewed participated in an informal meeting in Geneva 12 November with the new US ambassador to Switzerland, Donald Beyer, where the banking problem was raised.
Beyer later in the day told WRS public radio in Geneva that some 9,000 Americans took advantage of an IRS amnesty for citizens overseas that ended 15 October. He suggested in the radio interview that the number of names UBS will turn over to the IRS is likely to be lower than the numbers – up to 50,000 – tossed about earlier in 2009 by international media.
Geneva, Switzerland (GenevaLunch) – Voters in canton Vaud decide Sunday 27 September if they want to create a single canton-wide police force that combines the existing cantonal police and the various municipal forces. Lausanne’s voters will also decide where to put two new stadiums that the city wants to build.
On the same day in Geneva, voters will decide yet again on smoking in public places, and they will vote on whether or not to lower taxes. Also on the ballot: a change in the annual automobile fee. The city wants to penalize carbon dioxide-emitting passenger cars.
Details:
Swiss Federal Tribunal, Bern
Updated 14:00 Bern, Switzerland (GenevaLunch) – The Swiss cabinet has agreed to allow up to five additional but temporary posts for Federal Administrative Tribunal judges, to allow the high court to handle a sudden increase in legal cases likely to arise in relation to UBS client names requested by US tax authorities.
Bern said Friday 18 September that it expects some 500 appeals by the end of the year in cases where the Swiss finance ministry agrees to provide judicial assistance to the IRS, the US tax authority. The request for assistance are being made by the IRS as par of a 31 August agreement between Switzerland and the US.
No fishing from France, please, say Swiss
Bern, Switzerland (GenevaLunch) - The Swiss government says “so-called ‘fishing expeditions’ remain out of the question, even ones from France.” The Federal Department of Finance Monday 14 September clarified details of the treaty signed 27 August 2009 with France, saying that although the wording differs slightly from that of some of the new double taxation treaties with other countries, administrative assistance requests from France in tax cases “will not deviate in practice” from agreements with other countries.
See also: part 2 – Taxes overboard! Americans reconsider the IRS at the Geneva T party
and part 1: US-Swiss treaty details may not come in time to help US citizens abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here; correction added to point 5 below] Geneva, Switzerland (GenevaLunch) – US citizens and greencard holders living outside the US should be aware of new tax rules, but also new enforcement procedures, according to several groups and tax experts who organized a taxpayers’ information evening 2 September in Geneva: American Citizens Abroad, Democrats Abroad and Republicans abroad. Many US taxpayers living in Switzerland and elsewhere have only gradually become aware during 2009 that the IRS (US tax authority) has imposed new rules, a six-month amnesty that ends 23 September and it is taking a tougher stance with “non-compliant” taxpayers. Rumours have been thick on the ground, but hard facts few.
See also: part 1 – US-Swiss treaty details may not come in time to help US citizens
part 3 – What has changed for US taxpayers living abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here]
Geneva, Switzerland (GenevaLunch) - Many US taxpayers living in Switzerland and elsewhere have only gradually become aware during 2009 that the IRS (US tax authority) has imposed new rules, a six-month amnesty that ends 15 October and it is taking a tougher stance with “non-compliant” taxpayers. Rumours have been thick on the ground, but hard facts few.
The Geneva T for taxes party
The situation came to a head at a highly emotional meeting in Geneva Wednesday evening 2 September, when 200 American expatriates, citizens and green card holders, gathered at Webster University to learn about recent shifts in the tax situation, what has brought it about and what the implications are.
See also: part 2 – Taxes overboard! Americans reconsider the IRS at the Geneva T party
part 3 – What has changed for US taxpayers living abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here]
Geneva, Switzerland (GenevaLunch) - The Swiss government announced Friday 11 September that it is authorizing its finance and foreign affairs ministries to sign a new double taxation agreement with the US to replace the current one, which dates back to 1996. The step may ease nervousness among some Americans in Switzerland and elsewhere outside the US – as long as it means that details of the new treaty are published soon.
A Swiss government spokesperson told GenevaLunch 11 September that it’s impossible to know when the two Swiss departments will actually sign the treaty. Parliament retains the right to vote on it, as well, once the departments sign, and as yet there is no clear indication if parliament will or will not exercise this right.
Some US citizens and greencard holders who live overseas know that they are considered non-compliant under IRS (US tax authority) rules which are being more stringently enforced in 2009, and they are debating coming in from the cold. Others are only becoming aware they may not be fulfilling their US tax obligations, even though they assumed they were.
Bern, Switzerland (GenevaLunch) – The Swiss government said Thursday morning 13 August that details of the agreement with the United States in the case concering the IRS and bank UBS can be made known once the two governments have signed the agreement.
UBS New York headquarters
Update 2 Florida, USA; Bern and Zurich, Switzerland (GenevaLunch) – The bell hasn’t yet quite tolled for anyone in the US court case where the IRS is asking for names of UBS bank clients. Judge Alan Gold in Miami late Friday 7 August, Swiss time, gave the two governments another week, until 12 August and at their request, to hammer out details of an out of court settlement.
Reactions were mixed, with the Financial Times reporting that “Friday’s setback caused confusion” for investors, arguing that the “failure” to reach an agreement will hurt UBS shares. Swiss media were more phlegmatic, viewing the delay as an acceptance that a resolution of several technical issues requires more time, which the judge has given.
But who will take our money to finance the mortgage?
Update 25 July 07:20 Switzerland (GenevaLunch) - Two well-known Swiss cooperative banks, Migros and Bank Raiffeisen, have made changes in recent weeks to their policies concerning customers who are US citizens, or who are resident in the US. Specifically, both banks refuse all contact from the US. The steps taken by the banks, who are best known for mortgages and retail banking to middle-class customers, are a clear indication that US pressure is having an impact on the Swiss banking system. The moves are part of a trend that saw UBS in July 2008 alert non-US citizens who were resident in the US that their accounts would be closed as it reduced its US business.
Ironically, it is Americans trying to lead normal lives and pay their bills through their banks who are most affected – not the infamously wealthy and stealthy people the Internal Revenue Service (IRS) is hunting down. Also affected: Swiss citizens living in the US and people of other nationalities who have at some point lived in both countries. These are not the mythical secret, numbered accounts made famous by the likes of James Bond, but typical Swiss bank accounts covered by data protection laws in Switzerland.
The problem is complicated for US citizens and residents living outside the US because, according to American Citizens Abroad, a Geneva-based group, US banks are increasingly applying “due diligence” rules to refuse banking services outside the country.
Bern, Switzerland (GenevaLunch) - Micheline Calmy-Rey, Switzerland’s minister for foreign affairs, will meet with Hillary Clinton, US Secretary of State, in Washington, DC, 31 July. The two countries and Swiss bank UBS have been given until 3 August by a US federal court judge in Miami, Florida to find an out-of-court settlement for the IRS legal demand that the bank hand over client information on 52,000 accounts. The Washington Post carries an editorial that says the issue is emotional on both sides:
California legislators in the US were battling to keep the state from defaulting on its debts, unable to pay its bills, and from slashing many programmes. Governor Arnold Schwarzenegger has proposed $16 billion in cuts in order to close a $24b deficit. Democratic legislators have proposed tax increases, spurned by Republicans. The Obama administration has refused to bail the state out for fear of sending a wrong signal to other states in difficulties. California is the world’s eighth-largest economy, and has been particularly hurt by the downturn. Its revenues are heavily dependent on income taxes. Reuters, WP, Bloomberg
Geneva, Switzerland (GenevaLunch) – Money has not been flowing out of Swiss banks in a significant way as a result of the government’s decision in March 2009 to ease its strict interpretation of banking secrecy, “There has been no meaningful outflow of assets” from Swiss banks since Switzerland said it would adopt Art. 26 of the OECD (Organisation for Economic Cooperation and Development) Model Tax Convention, says Pierre Mirabaud, president of the Swiss Bankers Association. The convention obliges Switzerland to renegotiate tax treaties with other countries.
Mirabeau, speaking to the American International Club of Geneva 27 May, said the main factor that will lead to Swiss banks regaining trust is for them to begin to be profitable again. Asset values have dropped across the board because of very poor market conditions since the onset of the crisis late last year, but this has affected all banks.
The cheapest thing in Russia could soon be a cash register, with two million of them about to become unnecessary. The government made them mandatory in 2003 as an aid to collecting taxes, but the 15,000 rubles ($442) machines often cost more than the goods in a shop and, says the Moscow Times, quoting business people “who said cash registers have become a nightmare for them.” The move is part of measures to simplify the tax structure for small businesses.
Updated 8 April 08:10 Geneva, Switzerland (GenevaLunch) – The canton of Geneva will not see the likes of it again before 2012-2013, says David Hiler, finance director for the canton, who Tuesday 7 April announced results for 2008: a surplus of CHF492 million for the budget of CHF7.2 billion. Le Temps Wednesday morning shows a more dire picture in its analysis of the situation, noting that some costs, such as staffing, have risen and that while the city’s infamous debt has been reduced to CHF11.4 billion, it remains “astronomical.” Zurich, Le Temps notes in its article, is ending 2008 with a deficit of CHF179.3, largely due to the banking sector crisis.
Maybe saving money
Switzerland (Le Temps, Fre)- A second family salary can too easily be consumed entirely by day care costs in Switzerland, according to a new report. Day care centre costs are generally linked to parents’ incomes, thus the sliding scale may not make it financially worthwhile for a second parent to work fulltime, as the two “example” charts below indicate.
Switzerland (GenevaLunch) - If you have to file Swiss income tax, this is your last chance to get the forms in on time and avoid the late-filing fees that are automatically levied, for the first time this year. If you haven’t yet tried filing electronically, this could be the year to make that move! Deadline: 15 March.
Lausanne, Switzerland (24 Heures, Fre) – People who did not pay their taxes, which have in the end been written off as a loss by the communes concerned, cost Lausanne CHF8 million and communes in Vaud CHF14m in 2007, reports 24 Heures.
Bern, Switzerland (Le Temps, Fre) – Three of the seven Swiss federal councilors went to Brussels for breakfast Monday, and taxes were at the top of the menu.
Bern, Switzerland (GenevaLunch) – The Swiss federal government says it will provide tax deductions for children but that its review of the tax system in order to find a more equitable way to tax couples has not resulted in clear answers, and a basic change to the system will not be made, as expected.
A US Government Accountability Office report that came out Tuesday says that 72% of all foreign companies in the US avoided paying taxes, for various reasons, between 1998 and 2007. During the same period 57% of US companies also avoided paying taxes. Reuters
A series of new government revenue collection measures in Ireland, coming as markets are falling and housing sales are down, are a blow to the middle class. They include an increase in the VAT sales tax, to 21.5%, reduced deductions on pension plan contributions, a departure tax on foreign travel, and a €200 charge on second homes and another €200 on parking spaces provided by employers. Irish Times
