While Swiss banking giant UBS AG has agreed to release information on 4,450 client accounts to settle a contentious lawsuit with the Internal Revenue Service that centered on alleged offshore tax evasion by the bank's clients, the IRS said that it may eye other banks for similar activities.
While Swiss banking giant UBS AG has agreed to release information on 4,450 client accounts to settle a contentious lawsuit with the Internal Revenue Service that centered on alleged offshore tax evasion by the bank's clients, the IRS said that it may eye other banks for similar activities.
Details of last week's out-of-court settlement between Zurich-based UBS and the IRS were released this morning in separate statements by the U.S. and Swiss governments, which have been negotiating for months.
IRS commissioner Doug Shulman said during a press conference that the accounts being turned over held about $18 billion in assets at their peak.
He also made clear that the IRS intends to use the UBS case as part of a broader effort to crack down on offshore tax evaders.
The case, Mr. Shulman said, “sends a signal” that the IRS is willing to pursue other institutions.
“We are very interested in going after people with hidden assets offshore. Expect us to continue to be aggressive,” he said during the press conference.
In fact, tax attorneys who specialize in offshore tax evasion said that one of the key details to emerge from the agreement was that the IRS is widening the scope of the investigation.
The Swiss government has agreed to “review and process additional requests for information for other banks regarding their account holders to the extent that such a request is based on a pattern of facts and circumstances equivalent to those of the UBS case,” the IRS said in its statement.
“That is the most interesting part of the disclosure today,” said Caroline Ciraolo, a tax attorney for Rosenberg Martin Greenberg LLP in Baltimore.
“It opens the floodgates. The disclosure process is going to go on for quite some time,” Ms. Ciraolo said.
Kevin Packman, a partner in the Tampa, Fla.-based law firm Holland & Knight, agreed.
“This is just the beginning. It's not just limited to UBS,” Mr. Packman said.
“The same criteria will be applied to other banks, and it will be very hard to hide assets from the government.”
Mr. Packman is based in Miami.
The settlement will also dampen banks' interest in the offshore account business, according to John Collis, chairman of Conyers Dill & Pearman, an international law firm in Hamilton, Bermuda.
“Banks have been getting out of the business of bank accounts for high-net-worth non-residents for a number of years, and this settlement is bound to perpetuate that trend,” he said.
In addition, Mr. Shulman said that the IRS' Sept. 23 deadline for its voluntary disclosure program, which allows Americans who haven't reported income in offshore bank accounts to come forward and likely avoid criminal prosecution, won't be extended.
And IRS officials who gave a briefing after the press conference this morning warned that U.S. taxpayers with unreported offshore accounts shouldn't rest easy even if their name isn't on the list that UBS hands over.
“Don't assume you won't be contacted,” one IRS official said.
