Great piece by Joe Kristan at Roth & Company PC about FBAR reporting…

Tax Update Blog: ‘Cheat’? I don’t think the word means what they think it means.: “”

Similar Posts:

• Ask the taxgirl: Foreign Accounts and FBAR
• Ask the taxgirl: Oh Canada!
• Ask the taxgirl: FBAR and Power of Attorney
• Fix the Tax Code Friday: Foreign Accounts

It was a question posed to US taxpayers by the IRS in the wake of the UBS scandal: do you feel lucky?

The US offered US taxpayers the opportunity to voluntarily disclose offshore bank accounts as part of an amnesty program earlier this year. The choice? Come forward now and escape criminal prosecution or take your chances later.

It turns out that a number of US taxpayers didn’t feel quite so lucky. IRS Commish Doug Shulman has announced that more than 14,700 taxpayers came forward under the voluntary disclosure program. The disclosures were in the billions and covered accounts in 70 countries.

The number is higher than originally projected due to the numbers of taxpayers who made disclosures in the run up to the deadline. The deadline for disclosures had initially been September 23 but was extended to October 15 after input from tax professionals who were still fielding questions about the program from taxpayers.

UBS and the feds separately reached a settlement where UBS, in addition to a significant fine, agreed to release the names of over 4,500 US account holders at the bank. So far, only a handful of names has actually been released: at least two of those account holders have been sentenced to prison for their activities.

The remaining names will be disclosed over the next 10 months. Under the agreement, UBS will release the names of those account holders where there is a reasonable suspicion of “tax fraud or the like.” Generally, that includes high dollar accounts and accounts where there is a lot of movement of assets or complicated schemes. There will be procedure for appeals available in Switzerland.

ABC News is reporting that lawyers are already whining that their clients were misled by UBS about the extent of the banking secrecy. I suspect that means that lawsuits will be filed. That is, of course, how we like to solve problems in the US. It is *always* someone else’s fault, right? If the lawyers are smart, any such suits would do well to land in Switzerland and not in the US. Beyond the whole “juries likely don’t have sympathy for rich people who hide their money” issue, lawsuits based on the misdeeds of plaintiffs are not usually successful. Of course, that hasn’t stopped people from trying before…

For now, it’s a waiting game for UBS clients. The question is: do you feel lucky… now?Similar Posts:

• IRS Plays Chicken with Taxpayers
• Is UBS About to Name Names?
• Voluntary Disclosure Program Ends Thursday
• UBS Accused of Being a Tattle-Tale
• UBS Settles with IRS

The Dutch are well known for Delft pottery, wooden shoes, legalized prostitution and windmills. Perhaps not surprisingly, many of those things haven’t caught on in all areas of the world (oh c’mon, tell me that you have a pair of wooden shoes in your closet).

I have a feeling that list of things that aren’t spreading like wild fire is about to grow…

Effective in 2012, Dutch drivers will be monitored by GPS and will pay taxes on a per-kilometers-driven basis. For the average passenger car, the rate will be about € 0.03 per kilometer (or roughly $.07 US per mile). Drivers of trucks, commercial vehicles and less fuel efficient cars will pay more. Public transit and cabs will be exempt from the tax.

Additionally, the cost will increase for drivers at peak times.

How will it work? GPS will track the time, hour and place each car moves and send the information to a billing agency. The billing agency will deduct the taxes directly from drivers’ accounts.

If it works as anticipated, the Dutch government estimates that traffic will drop by 15% – and rush hour traffic will drop by 50%. Minister of Transportation Camiel Eurlings believes that carbon emissions will be cut in half.

Interestingly, the law will abolish current road taxes and sales taxes for cars. The final numbers should work out so that 6 out of 10 drivers are better off under the new scheme and reportedly, tax revenue will remain the same.

According to the German newspaper, Deutsche Welle, the tax will increase every year until 2018.

The news has stirred interest in nearby Germany with top German automotive expert Ferdinand Dudenhoeffer saying that Germany should “take the progressive (Dutch) model as an example.” Interesting for sure. But there’s one or two (or three or four or five) obstacles: namely Audi, BMW, Mercedes, Porsche and Volkswagen. Long considered an automaker’s paradise, Germany tends to be known for heavier, more luxurious, power cars – not so much the cheaper, smaller more efficient cars encouraged under the Dutch scheme. With that in mind, in a tough economy, Germany is highly unlikely to adopt a policy which might negatively affect the car industry any time soon.

But that doesn’t mean that it’s not on the radar of other countries. Singapore already utilizes Electronic Road Pricing, a pay-per-use principle, and in the UK, there is a congestion charge for some drivers in the designated Congestion Charge Zone (CCZ). Which makes you wonder… Which country, if any, will be next?

Technorati Tags:
Netherlands, Ferdinand Dudenhoeffer, Germany, auto industry, price per kilometer, auto tax

Similar Posts:

• Germany Taking Big Money Tax Evasion Seriously
• Germany Gets A Break
• Merkel Wins 2nd Term in Germany, Touts Tax Cuts
• Germany Tired of Holes in Swiss Policy
• Chinese Tax Revenues Up: Should We Be Worried?

Who says that a little pressure doesn’t work these day? Singapore and Liechtenstein have both apparently decided that they wanted to be one of the cool kids after all. This week, both countries received word that they are slated to be removed from the dreaded gray list of the Organisation of Economic Cooperation and Development (OECD).

The gray list is a list of countries – more than 30 currently – who have made noise about increasing financial transparency but have not taken the necessary steps.

In the case of Singapore, it had publicly endorsed the transparency standard for tax purposes earlier in the year but had not signed the requisite number of financial agreements with other countries. It will hit the magic number *12* when it signs an Avoidance of Double Taxation Agreement or DTA with France this week. Singapore has also renegotiated agreements or signed new agreements with Mexico, Qatar, Norway, Austria, Australia, the Netherlands, UK, Denmark, New Zealand, Belgium and Bahrain.

Similarly, Liechtenstein has agreed two new treaties with Belgium and the Netherlands, respectively. Liechtenstein has also signed agreements with Germany, France, UK and the US. It is negotiating with Italy, Sweden and Norway.

The countries follow on the heels of Switzerland and Austria, which were removed from the grey list in September. This brings to 15 the number of countries which have been moved to the “substantially implemented” category since April 2009. The fallout from UBS is widely viewed to have contributed to the rush to be considered “mainstream.” The OECD is laughing all the way to the, er, transparent banks…Similar Posts:

• Liechtenstein Inquiry Grows
• What? Tax Changes Benefit the Wealthy?
• Germany Tired of Holes in Swiss Policy
• A Handful of Tax Havens Turn a Corner
• Homes Raided in Massive German Tax Evasion Crackdown

Suddenly, it’s not so fashionable to have your money in Swiss banks. That’s sooo February 2009. This season, all of the trendy tax evaders are heading somewhere else.

In the wake of increased activity by IRS to track down previously undisclosed assets (joined by the taxing authorities in countries like the UK and Germany), banks in Switzerland are reporting that the assets just aren’t pouring in like they used to. The slowdown started midyear, not coincidentally the time when the US government was exerting pressure on Switzerland to relax its banking secrecy laws.

In support of this trend, two BoA/Merrill Lynch analysts, Derek De Vries and Marc Brehm, have reported that at least one Swiss Banking Group, the Julius Baer Group, “was slightly more cautious than we expected on net new money.” In other words, Baer isn’t drawing the number of new accounts globally that they once were.

And the pendulum swings both ways. If it’s no longer attractive for Americans to do business in Switzerland, then many Swiss have countered that they will pull out of the US. Wegelin & Co., Switzerland’s oldest bank, is recommending that clients “exit from all direct investments in US securities… on the grounds of the threat of inheritance tax coupled with uncertainty as to whether one might not, one way or another, be turned into a US person.” Their gist, and I’m not making this up, is that our state of “moral and fiscal decline” means that it doesn’t make sense to invest in the US anymore.

So it’s time to panic, right? Not at all. Pulling out of investing in US-controlled securities is an interesting recommendation but not a terribly viable one. Like it or not, even in the midst of a recession, the US economy is a huge part of the global scene.

It’s kind of like how you’ll continue to see Paris Hilton in the papers. Even if you don’t like her, she adds value to an event – even if it’s just added publicity.

In other words, they don’t have to like us but I think the Swiss will still invite us to their parties.Similar Posts:

• UBS Accused of Being a Tattle-Tale
• Holes in Swiss Tax Case: Swiss Claim Tax Evasion Not a Crime
• No UBS Settlement So Far
• IRS Crackdown on UBS Continues With Indictments
• Germany Tired of Holes in Swiss Policy

When it comes to economics, the US and UK tend to find themselves on the same page. A recent example is their consolidated front over the need for banking transparency – both countries took a tough approach with respect to the banking secrecy laws of in Switzerland and Luxembourg.

But this weekend, the US and the UK took decidedly different views over a proposal to tax financial transactions to support future bank rescues.

UK Prime Minister (for now) Gordon Brown is in favor of such a tax, referred to as a so-called “Tobin Tax”, as a way to take the burden off taxpayers in the midst of financial crisis. The idea would be to implement a tax or levy, also characterized as an insurance fee, to be implemented across the board on financial institutions in all economic centers including the US, Europe, Asia, and the Middle East. Brown described it as a “just distribution of risks and rewards.”

But US Treasury secretary Timothy Geithner has said he would not support such a tax, adding that it should not be the position of those today to pay for future risks. He did not, however, rule out the idea of any responsibility by banks to pay for the economic crisis – he just apparently feels that it’s too soon to consider a tax in the face of other alternatives.

Interestingly, Russia appeared to be in agreement with the US with Russian finance minister, Alexei Kudrin, also voicing skepticism over the tax. Canadian Finance Minister Jim Flaherty also expressed concern over the tax.

However, Max Lawson, the senior policy adviser for Oxfam was enthusiastic about the UK proposal, saying:

Gordon Brown today signalled that payback time for banks could be just around the corner. A tax on banks would be a major step towards clearing up the mess caused by their greed.

While the two day G20 Summit has ended, the matter is far from over. The International Monetary Fund is already looking into this very issue with an eye towards what it’s calling a financial sector tax. One way or the other, we’ll see further discussion on this…Similar Posts:

• PNC and Other Banks Benefit from Bad Debts
• Banks Get Approval To Repay TARP funds
• Looking for Bank Bailout News?
• Paulson Believes Taxpayers Will Benefit From Bail Outs, Also Promises Significant Weight Loss and Clear Skin
• And The Most Secretive Financial Jurisdiction in the World Is…? (Hint: there’s no cheese involved)

I’m going all Clairee from Steel Magnolias on you. I’m on the radio!

You can check out my interview with Jeff Horwich on Minnesota Public Radio about “sneaky rich people” here (I’m right after the vaccine report):

None Found

The Tax Justice Network has recently released its list of the most secretive financial jurisdictions in the world. And who topped the list? Luxembourg? Switzerland? Hong Kong? Caymans?

Nope, it’s the United States. Yeah, of America.

But don’t get too excited with your finger pointing. It has little to do with most of the US. It’s all about Delaware (you don’t hear that very often).

The Tax Justice Network has identified what they consider “a number of key contributors to global financial secrecy on a jurisdiction-by-jurisdiction basis.” They then map that data and it’s published as the Financial Security Index (FSI).

Delaware’s status as the “incorporation haven of the USA” and its, well, *favorable* tax laws, have contributed to its ranking. The TJN noted, for example, that “the growth of private individual deposits by non-residents was most robust in the United States outranking other popular financial jurisdictions such as the Cayman Islands, United Kingdom, and Luxembourg with total non-resident deposits equalling $2.6 trillion in 2007.”

Banking crisis in the US? What banking crisis?

The TJN considered the data substantial enough to place Delaware ahead of Luxembourg (2nd), Switzerland (3rd), the Cayman Islands (4th) and the United Kingdom (5th).

Of course, anyone familiar with Delaware already knows about its favorable laws. Many of our international clients approach us about a Delaware incorporation and often, they have already been advised by their local counsel abroad to incorporate in Delaware to avoid certain state and local taxes. Of course, what they’re often not advised is that merely being incorporated in one state doesn’t offset physical presence tests in other states that might eventually drag them into other states for tax purposes. The classic example is a manufacturing company which is advised to incorporate in Delaware even though they may be, say, building a facility in New Jersey. The presence of the building in NJ will subject them to NJ state tax, irrespective of their Delaware “tax home.”

Delaware also has laws and courts which promote asset protection and dynasty trusts inside the state. I should know since I used to work for a trust company in Delaware. I reviewed and helped administer many high dollar trusts, including a number of family trusts for names that definitely rang a bell. Again, sticking a trust inside Delaware is much like incorporating inside of Delaware – you have to know what you’re doing to take advantage of the tax laws. You can’t just throw money in a trust and yell, “Ha!”

What does this mean for the US and its reputation as it attempts to foil banking secrecy laws in other jurisdictions? Absolutely nothing. Zero.

It makes for a bunch of fun headlines but I don’t think it changes the US’ standing in the world in terms of financial secrecy. Truth be told, the TJN arranges its data as it sees fit but there’s just no comparing the secrecy of incorporation records (which can be public anyway) to the strict, no holds barred secrecy of Luxembourg and Swiss banking laws. It’s just not the same thing.

I also think the TJN has a way to go in terms of making its data mean something to those outside of its network. A relatively young organization, it was formed in March 2003. According to its website, “[i]t is dedicated to high-level research, analysis and advocacy in the field of tax and regulation. We work to map, analyse and explain the role of taxation and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens.”

As a tax geek, I have to say that I enjoy the research and data. I just think you have to make it mean something beyond a sound byte.Similar Posts:

• Oh Yeah?! Well, Your Cheese Stinks!
• US Clashes With UK Over New Tax Proposal
• UBS Accused of Being a Tattle-Tale
• Liechtenstein Banking Laws Undergoing Change
• G-20 Ready to Make a Statement About So-Called “Tax Havens”

Jeffrey Chernick, a toy salesman out of New York, was sentenced on Friday to three months in prison for hiding millions of dollars from the IRS. Upon his release, Chernick will serve six months’ house arrest and six months’ probation. The judge did not impose an additional fine as Chernick is already subject to more than $4.5 million in civil penalties for filing a false tax return.

Chernick becomes the second UBS client to be sentenced in the scandal. Earlier in the week, Steven Michael Rubinstein was sentenced to three years’ probation, one year of house arrest and a$40,000 fine.

I noted at the Rubinstein sentencing that I felt that the punishment was light. US District Judge James Cohn apparently felt similarly, noting with respect to these specific cases, “The concept that tax evaders can get probation sends the wrong message… Some amount of incarceration is warranted.”

Chernick cooperated with authorities, which may have lessened his sentence: he had faced up to three years in prison. But even prosecutors sought leniency for Chernick, suggesting that his cooperation played a “significant and early step” in the UBS investigations, offering information about other taxpayers and banks.

In addition to pleading guilty to tax evasion, Chernick also admitted to paying a bribe, arranged by attorney Matthias Rickenbach and Swiss banker Hansruedi Schumacher, to a Swiss government official for information about which UBS accounts would be given to US authorities. That investigation is ongoing and it will be interesting to see the reach of the bribery scheme.

Chernick began setting up offshore accounts as early as 1981 in order to hide commissions on toy sales from the IRS. Over the years, he moved money from account to account and otherwise attempted to conceal his assets.

Interestingly, Chernick made an effort to sign up for the IRS’ voluntary disclosure program but did not qualify. Taxpayers who were under investigation or already facing charges did not qualify for the program.

Expect more high profile disclosures over the next few weeks. Clearly, the IRS hopes to send a message. The real question is: who’s getting it?

Technorati Tags:
IRS, Jeffrey Chernick, Matthias Rickenbach, tax evasion, Steven Michael Rubinstein

Similar Posts:

• IRS Plays Chicken with Taxpayers
• IRS Drops Some Tax Penalties to Woo Evaders
• UBS Settles with IRS
• Are the Feds Backing Off UBS?
• Will UBS Name Names?

The IRS amnesty program for taxpayers who had previously failed to disclose income from offshore accounts ended last week on October 15. By all accounts, it was wildly successful.

According to IRS Commish Doug Shulman, nearly 7,500 taxpayers came forward to make voluntarily disclosures in hopes of avoiding criminal prosecutions. Dollar amounts ranged from $10,000 to $100 million.

Don’t expect any “Mr. Nice Guy” now. Next on the IRS’ list: more vigorous enforcement of offshore tax cheats.Similar Posts:

• Voluntary Disclosure Program Ends Thursday
• So Tell Me, Taxpayer: Do You Feel Lucky?
• UK Tries Out Amnesty for Offshore Accounts
• IRS Again Pursuing Offshore Funds
• IRS Targets Wealthy for Enforcement