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Friday, August 30, 2013

U.S., Swiss Strike Deal On American Tax Evaders

The U.S. government and Switzerland have reached an agreement that could expose Americans who have used Swiss banks to avoid paying taxes.

The agreement will allow Swiss banks to settle any potential U.S. charges if they disclose extensive information about their American clients, the value of their accounts and any help they received from tax professionals.

Those settlements would include penalties for Swiss banks that helped their U.S. customers avoid taxes, according to a senior Justice Department official.

The total penalties could top $1 billion, the official said. The department could also use the information to prosecute Americans for tax evasion.


  • Marty Schenker, executive editor of top news for Bloomberg. He tweets @mschenker.



From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.

Today, Swiss banks will be digesting some new restrictions on secrecy. The U.S. Justice Department announced a deal with Swiss authorities yesterday that requires Swiss banks to pay fines that could reach into the billions of dollars. They'll also have to disclose information about American account holders. Marty Schenker is the executive editor of top news for Bloomberg, and he is with us now to discuss. Hi, Marty.


HOBSON: Well, tell us, first of all, about the deal that was announced yesterday between Swiss authorities and the U.S. What does it do?

SCHENKER: Well, basically it - for those banks eligible to reach an agreement, they will have to pay - they can escape criminal prosecution if they pay fines and give up the names of people who hold secret accounts in Switzerland.

HOBSON: And it doesn't involve all Swiss banks, right?

SCHENKER: No, because there are a number of banks who are currently under investigation for criminal prosecution, for helping customers hide income in those secret accounts. And those folks will have to face the music at some point. Those prosecutions will continue and they're not eligible to join.

HOBSON: Now, is this all about tax evasion, about people in the United States who are putting their money in Swiss banks to avoid taxes? Or is it also about shady characters trying to move money around without the authorities seeing what they're doing? Or what is this about?

SCHENKER: It's mostly about tax evasion. It all started in 2009 with a big settlement with UBS, the big Swiss bank. UBS paid $780 million and turned over 45,000 client names, and that basically was the beginning of a call to all Swiss banks, you better stop helping Americans evade taxes.

HOBSON: And how much money does the U.S. lose each year from Americans hiding their money abroad?

SCHENKER: I'm not sure about the yearly figure, but Senator Carl Levin, who's been looking into this issue for a long time, estimates there's $1 trillion in illegal accounts around the world, not just in Switzerland. And that it means up to $70 billion in lost tax revenue to the U.S. government.

HOBSON: Wow. And, of course, putting money in a Swiss bank is not the only way to hide your money. You can also - there are islands in the Caribbean that are dedicated to this kind of thing. And as you have reported at Bloomberg, some people just renounced their U.S. citizenship to avoid taxes.

SCHENKER: It really is extraordinary. In the first half of this year, one - over 1,100 Americans had walked into their embassies and basically turned in their passports versus only 235 for the whole of 2008. And these are people who just are calculating it's better not to be a U.S. citizen than to face having to pay taxes or prosecution.

HOBSON: I think one of the famous examples of that was Eduardo Saverin of Facebook fame, one of the early members of the Facebook team with Mark Zuckerberg, who I believe renounced his citizenship. Marty, what does all of this do to the Swiss banking industry, this deal with Switzerland?

SCHENKER: Well, you know, it used to be that if you were a serious player in the world banking, you had to have a Swiss private bank, but that's not the case anymore. The number of Swiss private banks is shrinking. A lot of the big banks are getting out of the business entirely. It's just not worth the hassle. So there will be consolidation and a lot fewer private banks.

HOBSON: Marty Schenker of Bloomberg News, thank you so much.

SCHENKER: You're welcome.

HOBSON: And we were talking about a deal announced yesterday by the U.S. Justice Department with Swiss authorities that requires Swiss banks to pay fines, could reach into the billions of dollars, and disclose information about American account holders. And as Marty says, it's mostly about tax evasion. We'll be back in a minute with more. HERE AND NOW. Transcript provided by NPR, Copyright NPR.

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  • WhiteKat

    Can someone please explain to me how place of birth = USA makes one a US taxpayer (and thus a tax cheat if not ‘complying’) – regardless of country of residence; regardless of ancestry; regardless how long one lived in USA (leaving as an infant is no excuse); regardless whether or not any income was ever earned in the USA; regardless of other citizenship held; regardless that taxes are paid to the government of the country one actually resides in.

    I just do not get it!

    Land of the free? Seriously?

  • honeebadger

    Most of the renunciants are long term expats. The US government’s priced it’s citizenship out of the market for Americans and ironically it’s only the very rich of us who live abroad who can afford to keep up with the ever increasing cost of maintaining US citizenship. It’s not unusual for an American living abroad to pay $2K+ in reporting and filing fees to owe very little or nothing in tax. For most, the cost is unsustainable and is forcing many to choose between US citizenship and the welfare of their families. We are now seeing the end of American global migration and the death of America’s diaspora.

    • Samuel Clemmons

      To NPR: How would a normal US Citizen, living outside of Europé, be able to live a normal Life outside of USA? Could that person open a hair salon? No–the personal reporting requirements for a US Citizen back to the USA are so high that it is impossible for a US person to run a business outside of USA — it is completely impossible to perform that many hours of filling out forms (more than half of a working year). The only way for a US Citizen to live a normal Life outside of USA is to get rid of their US citizenship — that is what has been built into the USA tax system — due to the USA believing collectively that any Mercan liviing outside Merca is there to avoid paying his taxes to Merca. And NPR is leading the misinformation Campaign for Bloomberg and the current political administration.

  • SwissTechie

    Prior to renouncing, I didn’t earn enough to owe the US any taxes, thanks to limited US efforts of reducing the troubles of double-taxation. I also got along just fine with the IRS, never had any problems with them, did not feel that I would become prosecution and the IRS even still owes me about $700 from the year 2000.

    The actual reason why I renounced US citizenship is because some influencial individuals, like Jeremy Hobson and Marty Schenker, wrongly accuse the American diaspora of being “tax cheats”, causing them to become a serious risk to their local banks and resulting in these local banks rejecting US clients. In the US, such rejections are known as national origin discrimination, national origin discrimination is a US federal crime and thus the US government is causing US federal crimes against the American people outside of US jurisdiction. The US government has become a federal criminal, thanks to Jeremy Hobson and Marty Schenker. You guys are working overtime to make the US government criminal against the American people!

    Which American living abroad cannot renounce US citizenship in response to that? None, unless they immigrate to the US.

    I could not immigrate to the US because I had promised my employer that I would remain with my company until retirement. A few days ago, my company got sold, is now being managed from the Silicon Valley, and my new American employers also don’t want for me to quit my job in order to immigrate to the US. It needs the staff, location and product for further growth in this industrial sector. Thus, I’m a non-American working for the benefit and advantage of America, outside of America. America needs me here!

    Thus, Jeremy Hobson and Marty Schenker, it’s your damn fault that I renounced US citizenship and I demand and apology. I demand that you both apologize to Americans abroad and to the American people. You both are the real anti-Americans, the American traitors. You guys are the ones who have no loyalty to America and the American people. It should be both of you who are renouncing US citizenship, not those who are being harmed by your irresponsible and uneducated writings. Shame on you!

    Oh and by the way, of the 20 years that I’ve lived in Switzerland, I’ve never encountered anyone who recommended or advised that I cheat on US taxes. It’s rather been the contrary. My personal experience demonstrates that this US-Swiss “deal” is a scam. The US government is simply broke and is trying to get free money using any means possible.

  • UncleTell

    So Marty thinks it’s mostly about tax evasion but I beg to differ.
    The US government has two witch hunts going with FATCA. One is against
    foreign financial institutions (Swiss banks are a special target) and
    the other is against US persons (at home and abroad). This is the great
    American hegemon trying desperately to maintain the worldwide reign of
    the US dollar while keeping a tight rein on all US persons. FATCA is NOT
    about “tax cheats”. FATCA is about control. The best guess is that
    FATCA will only raise 800 million dollars per year for the US treasury.
    Meanwhile the financial institutions outside the USA will be shelling
    out hundreds of billions of dollars to set up their computers and hire
    compliance officers in order to deal with the complex and often
    confusing FATCA instructions issued by the IRS. You’d think the
    financial institutions could just offer to pay an extortion fee in
    return for the scrapping of FATCA but their offer would be denied. It’s
    control the USA wants not the 800 million which is only enough to run
    the federal government for 2 hours. So Uncle Sam and Marty just turn
    their eyes to the sky and whistle the Star Strangled Banner while
    institutions and individuals drop under a heavy load of FATCA crap.

  • Chris

    I wonder if the $1 trillion mentioned includes the $35 billion that the King of Thailand is worth and is suspected of hiding from the US government. Rama IX, the current king of Thailand, was born in Massachusetts, is therefore a US citizen under US jus solis citizenship laws and should be filing annual US tax returns and FBARs. The potential haul from just this one individual could be huge. The FBAR fines alone should be three times the highest value in his financial accounts!
    The IRS should dispatch an up-and-coming agent without delay to demand that Rama IX, as a US citizen, pay his fair share of US taxes. Once an American, always an American, until he can show that he has renounced his US citizenship, received a Certificate of Lost Nationality (CLN) and has paid all US exit taxes. Please bring this tax cheat to justice!

  • Samuel Clemmons

    Obama and his Cadillac are coming to SWeden next week, where he will sign the FATCA deal to catch all of the people who have been running away to Sweden to avoid taxes.

  • Samuel Clemmons

    From Wikipedia: “Bloomberg L.P. is a privately held financial software, data and media company headquartered in New York City. Bloomberg L.P. was founded by Michael R. Bloomberg in 1981 with the help of Thomas Secunda, Duncan MacMillan, Charles Zegar[6] and a 30% ownership investment by Merrill Lynch.[7] Bloomberg L.P. provides financial software tools such as an analytics and equity trading platform, data services and news to financial companies and organizations through the Bloomberg terminal (via its Bloomberg Professional Service), its core money-generating product.[8] Bloomberg L.P. also includes a wire service, a global television network, a radio station, websites, subscription-only newsletters and two magazines: Bloomberg Businessweek and Bloomberg Markets”
    Now, NPR, what interests do you suppose that a New YOrk bankhouse and data services provider might want to have to sell a program to Control that other banks in the World don’t compete with them?

  • Chris

    Messrs Hobson and Schenker: Swiss SRF television interviewed an ex-American for a broadcast on July 4th. He is a self-employed photographer and video producer. He speaks of the freedom gained from giving up his US citizenship and states near the end that he would not hire a US citizen abroad due to added complications that he just escaped. Another multi-millionaire escaping US taxes? No, just someone who wanted a bank account and to uncomplicate his life:

  • Samuel Clemmons

    Being born in the US is a mistake this woman will regret for the rest of her Life. Why would she want to retain citizenship?

    ex 52.2: Taxpayers who are foreign residents and who were unaware they were U.S. citizens.

    Example 1: The taxpayer was born in the U.S. to parents of foreign citizenship. She grew up in a foreign jurisdiction, unaware that she had been born in the U.S. She has a $60,000 account in the foreign jurisdiction. She has never filed U.S. returns or FBARs. She became aware she was a U.S. citizen when she had to get a birth certificate in order to obtain a passport from the foreign jurisdiction where she resides. She is entitled to the reduced 5% offshore penalty.

    • honeebadger

      This reduced penalty is for not reporting her bank accounts where our hypothetical person had resided her entire life, even if no income was generated from those accounts. The penalty has nothing to do with the non-reporting of income. US citizens living in the US aren’t required to report on their bank accounts where they live, only the income those accounts generate. The US has found a convenient way to extract revenue from income earned legitimately by unsuspecting Americans living in other countries who were unaware of their obligations to the IRS and the US Treasury. Predatory, pure and simple.

  • honeebadger

    The US moving from a system that taxes based on citizenship to one based on residence like virtually all other citizens of the world enjoy, would stem the flow of renunciations.

    The CBC puts Canada’s renunciations at about 140 a year. Considering the US has about 9x times the population of Canada’s, you’d expect the US’s to have no more than about 1260 renunciations a year. Well, they had nearly that in the last quarter alone. Until 2011, most Americans were unaware of the extra burden that US citizenship placed on them when living abroad. For the vast majority, that burden is proving to be unbearable, forcing them to renounce their US citizenship rather than uproot families, careers and lives to move to the US. The US government expects its renunciants to be US tax compliant and a citizen of a country other than the US when renouncing US citizenship. For those who were until recently unaware of these obligations, it could take many many months or even years before they are in the position to renounce US citizenship. This is just the tip of the iceberg as far as renunciation numbers go. It’s the death of America’s diaspora, all at the hands of the US government’s exceptional citizenship based taxation policies. I hope it was worth the few bucks they squeezed out of those they could before those people found freedom elsewhere.

  • Just_Me_Also

    Jeremy: A couple comments about your story that need better clarification, as your “expert” made some misstatements and illogical leaps that misrepresent things. There is a Bigger story.

    1. First of all, It is a given that Homeland Americans have evaded taxes abroad with secret accounts, but the UBS prosecution resulted in them giving up 4,500 names to the DOJ, not 45 thousand names as Marty said. Probably just a slip of the tongue, but a BIG difference!

    2. Any representation of how much money is hidden abroad coming from Senator Carl Levin is highly suspect. It comes from back of the envelop WAGS from ideological staffers who really have NO IDEA. To repeat something that they say is just to buy into their agenda. The Joint Committee on Taxation (JCT) when they passed FATCA to “end tax dodging for ever” only thought that it would result in $800 Million a year in revenue, but even that was a WAG.

    3. The BIGGEST Tax Haven in the world is in U.S. financial institutions like those in Florida and Texas who hold $XXXX billions of Latin American Tax evader money. What if Mexico or Brazil decided to pursue American banks with prosecution fervor the way the U.S. has pursued Switzerland? Think there might be an uproar? Sometimes we need to clean up our back yard before venturing across the fence to tell the neighbor 10 doors down that his yard is full of weeds.

    4. Not all holders of Swiss Accounts are necessarily secret for tax evasion purposes although certainly some Americans in Boston probably have done that. There are many Americans that live in Switzerland, that have normal banking activity like checking and savings and mortgages and are negatively impacted by the DOJs and IRS broad brush offshore jihad. Then there is the Congressional FATCA legislation from 2010 which is now shutting them out of normal banking. Unintended Consequences and collateral damage, or by design?

    4. Did you know that, the BIGGEST tax haven for Corporate beneficial Ownership in the world is not those Caribbean Islands you quickly mentioned, but is closer home to you in Delaware, or Wyoming, and certainly Senator Harry Reid’s Nevada. Maybe you didn’t see the CNBC stories like this one…

    “Ranch House Near Reno is a Thriving Tax Haven, and It’s Not Alone ”


    4. While your discussion of Tax Evasion primarily relates to U.S. Homelanders, the impacts of 4 years of an aggressive offshore jihad with Congressional FATCA legislation, imposition of FBAR penalties, IRS Offshore Voluntary Disclosure Programs (OVDP) that swept up minnows abroad as well as Homeland Evaders in a ‘one size fits all penalty regime’ all combined with the unique nature of US Citizenship taxation regardless where you reside (NONE of which you mentioned), has created a toxic brew for Americans living abroad.

    Many long term American’s abroad are now deciding to hand in their membership in what has become, under this Administration, a “U.S. Tax, Form and Penalty Club”. It is a logical and reasoned “cost vs benefit” decision unrelated to any EVASION theory you have implied with your stories narrative.

    5. The jump in IRS reports of renunciations are probably very much understated as the data source they use for reporting is “Probably” IRS form 8854, although it could include State Department Certificates of lost of Nationality data (CLNs), or I-407 forms, but without a FOIA, we don’t really know for sure, nor does Marty know. What we do know, is that it is WAY understated!

    What he reported represents just a slice of the pie, but NOT the whole enchilada, as they say, and includes “Green Card” holders as well as Citizens some of which are accidental Americans having never lived in America. There are certain thresholds for reporting, but looking at the names in it is all over the Map as to what it includes. He should NOT make assumptions this is about evasion. It is something else much BIGGER that you could devote an entire story(s) to as the WSJ has done recently.

    Here: http://on.wsj.com/1cSEN40

    Here: http://on.wsj.com/14QggY2

    Here: http://on.wsj.com/16Z6p2m

    Or how about PRI’s “The World”. They did a reasonable story you might have missed. http://bit.ly/1bIlma0

    Or, you might contact the well respected Tax Analysts and get a copy of their August 26th article “Solving the Expatriation Enigma by Marie Sapirie and Stephanie Soong Johnston

    To walk into a Consulate abroad and renounce Citizenship is NOT an easy decision taken lightly or an inexpensive process. It rarely would JUST be driven by Evasion or Taxes alone. Complexity and bad U.S. taxation and enforcement policies drive the decision as well as family matters and job opportunities. If you want to Evade, you would NOT present yourself to the “State Department” and fill out the required IRS forms and potentially pay an Exit Tax. That is NOT what Homeland Tax Evaders do. It is what the Tax compliant Americans abroad do.

    6. The leap you made to Saverin as someone renouncing to avoid taxes is totally wrong. For the privilege of exercising his UN Declarations of Human Rights, he had to pay a VERY significant Exit Tax, and had to be tax compliant for 5 years. That by definition is NOT evasion. However, if he is to live abroad, and do business abroad, living under U.S. Citizenship Taxation and FATCA makes him a toxic asset for future business relationships. It is logical that he decided to give it up to live a normal life abroad and be competitive with other nations citizens.

    Why Fewer Americans Live Abroad. U.S. tax laws put Yanks at a disadvantage against Aussies and Brits in growth regions like Africa or Asia.

    Notice he did NOT give up his Brazilian Citizenship, where he was born, and why is that you might ask? If you truly look for the answer, as a good journalist would, you might have a better understanding of what is going one. As a new program on NPR, this would be a good “Here and Now” in depth analysis.

    America practices Citizenship Taxation, and the rest of the world practices Residency based taxation just like Massachusetts! If you move to California, should Massachusetts have the right to continue taxing you and requiring you to report all banking activity, under Draconian penalty threat, back to them? Think about it? That is what the U.S does.

    There is MUCH more to this story than the simple narrative presented within the confines of the story of U.S. Bullying of Switzerland banks. Dig deeper, and you might find a “Here and Now” story you didn’t know existed. :)

    Thank you.

    • Samuel Clemmons

      Can add that the total prosecutions of persons evading taxes in Switzerland–the whole thing that started this jihad upon the accounts of US Citizens living normal lives abroad, is 90 convicted tax evaders. Think of the billions of dollars being thrown down the drain in every country in the World to meet FATCA demands, in order to chase down 90 criminals. And Think that 7 million US Citizens overseas have been labeled guilty-til-proven-innocent criminals, based upon 90 convictions.
      Ushering in this report thru NPR is a perfect example of Orwellianism.

  • Sally

    No, I did not renounce my US citizenship to evade taxes. I did it because I want to continue to be able to have a regular bank account in the town I live in.

    Having a local bank account (duly reported to local officials, paying higher tax rates on the interest than would be due in the US), is not “hiding”.

    Your claims are simply outrageous. We ex-expats expect an apology.

  • Marie

    Regarding US citizens living abroad… What benefits do we receive in return for any taxes filed or paid to the US gov???? NOTHING, ABSOLUTELY NOTHING. Taxpayers abroad are only eligible to pay, not to receive. We are not entitled to social security/welfare/food stamps/unemployment benefits/maternity benefits/medicare, etc. We take nothing from the US, but we’re expected to give, on top of what we pay in our high tax home countries. Absolutely unfair, taxes are a two way street. Perhaps it will take 6-7 million citizens abroad demanding social welfare and benefits to force legislators to think twice about citizenship based taxation. If FATCA forces my Canadian banks to close my accounts, then I am destitute. At that point I should qualify for US social assistance no differently than if I was resident in the US. How can the US justify taxing people that a) do not reside within their borders and b) are not eligible for any social benefits if needed???

Robin and Jeremy

Robin Young and Jeremy Hobson host Here & Now, a live two-hour production of NPR and WBUR Boston.

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