US pressure on Swiss for bank names accompanies Fatca, FBar pressure on overseas Americans
Paradeplatz in Zurich: Credit Suisse
ZURICH, SWITZERLAND – Two Swiss-German newspapers spilled the news Sunday 4 September that the US is pressuring Switzerland with a short deadline and legal threats over bank data related to Americans suspected of hiding taxable assets in Switzerland. SonntagsZeitung and NZZ write that the US is demanding that Swiss bank Credit Suisse and several other banks hand over the names of a significant number of bank clients by Tuesday 6 September.
The newspapers are basing their information on details that are reportedly part of a three-page letter written by US Deputy Attorney General James Cox to Swiss diplomat Michael Ambuhl, threatening legal action if US demands are not met to furnish the names of US clients who handed the banks $50,000 or more between 2002 and 2010.
The story is being widely covered by media outside Switzerland as part of a Swiss banks and “tax cheats” saga, an over-simplification of a situation that has many threads, only one of which is how wealthy Americans or green card holders hide their money abroad.
FATCA, FBar the new overseas American tax lingo
American Citizens Abroad is calling for US Fatca legislation to be repealed
The news comes as US citizens abroad grapple with the implications of two extended deadlines: a very short deadline extension to 9 September announced at the end of August by the IRS, the tax arm of the US government, to come forward if they have not filed FBar forms in the past, and the recent one-year extension to 2014 of implementation of the new Fatca (Foreign Account Tax Compliance Act) legislation.
Under Fatca, foreign banks will have to announce, to the US, assets of American citizens who are clients, whether they are based in the US and using offshore services or resident abroad and using the bank to handle daily banking needs, including regular payments such as rent or mortgages, salaries and pension funds or trusts that are their main source of income.
American Citizens Abroad, a non-profit group based in Geneva that works closely with both Republican and Democrat groups for American citizens living outside the US, says that Fatca is “using a bulldozer to go after an ant hill” and that the price to the US will ultimately be too high. The group wrote, in a 31 August letter to US Secretary of the Treasury Timothy Geithner and top US tax officials demanding that Fatca be repealed, that
“Fatca will provoke a serious backlash from foreign governments who find it unacceptable, and rightly so, that the United States unilaterally extend US law worldwide.
This is financial imperialism. At a time when the United States needs the cooperation of the rest of the world to help resolve its major domestic debt problems and to reinvigorate its economy, it is counter-productive and dangerous to provoke foreign governments and force their financial institutions to become the policemen of the IRS, by requiring that they spend billions of dollars in compliance for the sole benefit of the IRS, and to force them to break their own domestic laws to do so.”
Spotlight on Credit Suisse, but it’s not the only targeted Swiss bank
BERN, SWITZERLAND – A Swiss spokesman for the new State Secretariat for International Financial Matters (SIF), Mario Tuor, has confirmed that Switzerland and the US have been holding “informal talks” to explore solutions to the problem of undeclared assets held by Americans in Swiss bank accounts, but he told Reuters Friday 10 June that many of the details appearing in the media jump the gun and can’t be confirmed.
The rumours have been flying for the past two days, with Reuters, Bloomberg and the New York Times vying for scoops and exclusive information and ultimately giving credence to the stories. The newspaper quotes three unnamed sources; US government officials leaked the information to the newspaper that the two countries were expected to come to an agreement in July: “As part of the agreement under discussion, known as a global resolution, US government agencies would invite the banks to pay a fine, exit their undeclared offshore banking businesses for Americans, and turn over client names to the Internal Revenue Service (IRS) and the Justice Department.” In exchange, says the paper, In exchange, “the agencies would drop an ongoing investigation into the banks.”
US officials have often in the past used the New York Times to leak information and their position, in advance, on Swiss-US tax and financial discussions.
Tuor told Reuters that “the two sides had exchanged ideas but that he could not confirm the July date, whether the two sides were eyeing a multi-bank solution, or any other details mentioned” in an article published Thursday by Reuters. “‘There were several sets of talks, one of which was on the sidelines of the IMF’s spring meeting and was about the Fatca, though ideas were also exchanged about finding a solution for the past,’” Tuor told the news agency.
Fatca is the Foreign Account Tax Compliance Act adopted by the US at the end of 2010, which goes into effect in 2013, and which will require non-US banks to provide the US with considerable data on the accounts of Americans and foreigners with US assets. The goal is to catch people who are illegally avoiding pay US tax.
A side effect of the US adopting Fatca, however, has been a growing reluctance on the part of banks in Switzerland in particular, but also banks elsewhere, to keep US citizens or foreign residents in the US as clients. Some accounts have been closed, creating a string of financial management problems for people who are not hiding from the IRS.
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
Geneva rally4sanity, at the Bastions park (photo: Maya Samara)
Geneva, Switzerland (GenevaLunch) - The crowd was far smaller than those in the United States, but some of Geneva’s American citizens showed up at the Bastions park Saturday 30 October as part of the US Rally to Restore Sanity. The Geneva event was organized by the group Vote from Abroad, which is making a push to get overseas Americans registered to vote.
The Rally to Restore Sanity was about, hmm, umm, well, people who are fed up, or, in their own words, from the US: “If we had to sum up the political view of our participants in a single sentence. . . we couldn’t. That’s sort of the point.”
Participant Maya Samara told GenevaLunch that the group included “two Uncle Sams, a few groups of students who were happy to swing by on their way to pre-Halloween festivities, and others who came out before heading out to a movie. Several women in their 60s were relieved to see the the gathering form when people started to appear a few minutes before 6pm—flash mob style—as up until that moment, they wondered if they were in the right place.”
The rally attracted people from ages 18 to 80, she notes.
Geneva rally4sanity, at the Bastions park, under the watchful eye of Geneva's famed Reformers, on the wall (photo, Maya Samara)
“By 6:20pm we dispersed, having made some new friends, taken a bunch of photos to post up on the iPhone app for the Rally4Sanity and entertained a few Japanese tourists!”
Geneva, Switzerland (GenevaLunch) - American voters abroad, including those in Switzerland, are being encouraged to register again to vote, by the Overseas Vote Foundation.
The group notes that: “New regulations for overseas voting are in effect for 2010.
To be sure you get your ballot, we strongly encourage overseas voters to refile the official registration/ballot request form every election year, starting this year. It is always best to file this form as early as possible! Likewise, if you registered this year for your State Primary Election, you should still request a ballot for the General Election.”
The foundation’s voter help desk answers a multitude of questions and the site now has a database of state-specific information.
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.
The US Saturday warned its staff to send families out of Juarez, Mexico, where it has a consulate, shortly before three of its staff were killed in drive-by shootings in the border city, famous for its violence. The US is now sending eight FBI investigators to join Mexican agents looking into the shootings, and US citizens are being warned to avoid the area. Gunfights have broken out in other border areas, miles away, as drug wars appear to be stepping up.
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.
US citizens in Geneva, Switzerland with Ambassador Donald Beyer, centre back, 12 November 2009
Geneva, Switzerland (GenevaLunch) – A small group of Americans met informally with their new ambassador, Donald Beyer, Thursday 12 November, the first such meeting in Geneva in some 20 years, according to the members of American Citizens Abroad (an international organization based in Geneva) who participated. The discussions were wide-ranging and included:
Zurch, Switzerland (GenevaLunch) - Bank Julius Baer joins the growing ranks of Swiss banks moving out of the US client managed wealth business. The bank announced that it has begun a gradual shift away from American customers, but the move is not hurting the bank’s overall wealth under management: the bank reports that in the first 10 months of 2009 total client assets increased to CHF234 billion and assets under management rose to some CHF 150 billion, up 17%, compared to a year earlier.
Spokesperson Martin Somogyi told GenevaLunch that details about the US client business are not available now, although the bank may provide them when it releases 2009 full year results in February 2010. He clarified that US citizens resident in Switzerland “who are tax compliant” are not part of this group and will remain bank clients.
Update 2 15:45 The IRS will extend the 23 September deadline,”a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009″, the US tax agency announced 21 September.
The IRS announced Monday 21 September that it is pushing back its amnesty deadline for overseas US citizens and greencard holders to file some forms late. The complete announcement:
The Internal Revenue Service today announced a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009.
Under special provisions issued in March, taxpayers with these hidden accounts originally had until Sept. 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.
IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.
The IRS also announced that there will be no further extensions.
Zurich, Switzerland (GenevaLunch) – Swiss bank UBS will close or transfer Wednesday 1 July, a month early, all US resident bank accounts that are not declared to US tax authorities, an unnamed official of the bank has told Swiss financial news agency AWP (20 Minutes and romandie.ch). The information could not be confirmed Tuesday evening, 30 June.
The report refers to account-holders who were earlier informed by the bank that it would close their accounts if they did not wish to transfer the money to a dollar-based account in the United States.
US President Barack Obama, while maintaining the trade embargo with Cuba, has eased some restrictions that particularly affect Cuban-American families: cell phone companies and television broadcasts to the island will be allowed and US citizens will be allowed to make unlimited family visits to the island and provide unlimited financial aid to their families. NPR
Three members of Congress, US Democrats, met with former Cuban President Fidel Castro after meeting with his brother Raul, who now heads the country. The Americans were part of a larger team of seven who visited the island, sparking reports that the two countries are prepared to start easing relations. Congress will consider a bill to allow US citizens to travel to Cuba, but the trade embargo, in place since 1960, is unlikely to fall soon, says a BBC reporter. But the Miami Herald, with a large Cuban expat population among its readers, was upbeat about the possibilities opened by the visit and Castro’s comments afterwards on a Cuban government web site.
A US circuit court of appeals panel in Manhattan has ruled that “reasonableness,” but not a warrant is needed to wiretap and search US citizens abroad, in what could be a critical, precedent-setting case. The decision follows the conviction of men accused of involvement in two bombings, one in Kenya and the other in Tanzania, in 1998. Their lawyers say they will appeal, that this is an issue for the Supreme Court to decide. New York Times
Title: Declaring Swiss bank accounts – a US perspective
Location: Geneva, Ramada Park Hotel
Link out: Click here
Description: Guest Expert: Scott D Michel, member, Caplin & Drysdale; H David Rosenbloom member, Caplin & Drysdale
Start Time: 11:45
Date: 25 Nov 2008
End Time: 14:00
