Swiss Banks: Privacy Or Piracy?



On August the 19th 2009 the IRS finally reached an agreement with the Swiss banking giant UBS for the latter to disclose the details of some 4,450 US account holders believed to be using their Swiss bank accounts for tax evasion purposes.  The deal was hailed as a victory by US politicians from both sides of the fence as they have united in their fight to bring tax evaders to justice – but why is taxation avoidance seemingly such big business in America?

The problem is believed to be so endemic that a so-called tax amnesty was offered with a cut off date originally of September the 23rd 2009. The Internal Revenue Service extended the deadline to October 15 stressing there would be no further postponements. This action allowed US citizens at home and around the world who have previously failed to make full disclosure relating to their overseas and offshore holdings to come forward and face limited fines and reduced repercussions from the IRS.

Perhaps the question one should be asking is why Americans are seemingly driven as a nation to hide their wealth and protect their assets so aggressively. Maybe the problem Americans have is not with tax evasion but with tax rates and the far reaching nature of their policy on taxing a US citizen’s worldwide income and gains regardless of where in the world the individual lives, works or retires. More annoyingly for many American expats is that any wealth earned overseas is also subject to US taxation.

There’s really no doubt about it, the previous American government launched the tax evader witch-hunt in an attempt to deflect attention from the nation’s own failing economy.  It whipped up hatred for those it held up as exploiting the tax system and profiting whilst others suffered in poverty in the US.  By castigating certain pockets of wealthy society the Bush administration attempted to win the votes of the average person. By suggesting that a handful of US citizens were robbing the economy of billions of dollars worth of tax income, Bush managed to redirect a certain amount of attention away from the gaping cavernous hole that he left the US economy in when he finally left office.

The incoming government has seemingly kept up momentum in this cat and mouse game. They are being wily about it too, keeping their cards very close to their chest to give nothing away to benefit those who have avoided paying taxes but are unsure as to how much the government actually knows about them.  In the deal signed with the Swiss government in August a sealed document was handed over that outlines the criteria by which the Swiss will have to select which American clients will have their details turned over to Washington.  This document’s contents are being kept as secret as the Swiss banking system once was because Obama’s men and women don’t want anyone getting wind of which criteria make a person’s activities and antics offshore of worthy note and due to an investigation and which don’t.

By holding back and displaying a poker face to the nation, the new government is forcing potential tax evaders into a game of chicken.  Who will break, who will reveal their hand first?  Well, as mentioned the exceptionally narrow window of amnesty has been offered by the government to allow anyone who has knowingly avoided making a full disclosure over the past 6 years to come forward.  Following the end of this amnesty the government has advised that it may make known the contents of the aforementioned sealed letter.  If you’re a tax evader are you going to take the risk that the government knows nothing about you – or are you going to ‘fess up – it depends how big your balls are, or how big the fine will be that you’re facing I suppose.

The consequences of this bi-party approach to stamping out tax avoidance has already taken a very high toll – it is alleged that the philanthropist Finn M. W. Caspersen, heir to the Beneficial Corporation fortune took his own life as a net closed in around him following allegations of serious tax avoidance for example.  So is it fair to hunt down and hound those Americans who attempt to shield their wealth offshore?  Well, in so doing such US citizens rob directly from the mouths of the poor both in their own nation and in developing countries around the world that require support from the US government – so yes, many people apparently think it is acceptable to go after tax evaders – after all they are criminals and what they are doing is high crime.  But if that’s true, then why do so many every day Americans go to such lengths to try and squirrel away some of their cash?

If the tax system in America was fairer, if the previous government hadn’t bankrupted the nation and if the current government wasn’t hell bent on implementing an unworkable healthcare reform perhaps Americans would be happy to pay their taxes.  If Bush hadn’t marched American soldiers into what may people believe was an illegal war and left them there to die in their hundreds perhaps more Americans would be willing to fund the likes of the Department of Defense with their taxes.  And then if Obama hadn’t reneged time and again on his pre-election promise not to raise taxes for Americans, again maybe fewer US citizens would feel so aggrieved to the point at which they make a conscious decision to break the law and protect their own wealth and future prospects by shielding their assets overseas.

The debate is a heated one – and at the end of the day all we have to go on are the facts.  The facts are that Americans evade taxation in their thousands – there are believed to be 52,000 US account holders at UBS in Switzerland alone, 4,450 are facing investigation for a start.  The Americans who evade taxation come from all walks of life with tax attorneys reporting in the run up to the end of the tax amnesty that they have had calls from those with millions undeclared in typical offshore tax havens, as well as from those who live and work abroad who just run a day-to-day account in another nation that they have never declared.  Tax evasion is a crime; legitimate taxation optimisation is not.  When you tax someone too aggressively or waste their taxation revenue, you will aggrieve them – an aggrieved taxpayer is far more likely to want to find ways to optimise and protect their fiscal position.

The fact remains however, US politicians from both main parties want American wealth back onshore where they can see it, track it and tax it.  They allegedly want the tax to fill in the gaping hole in the economy – although the average American had nothing to do with the nation’s fiscal collapse – and they are trying to promote the idea that if you have nothing to hide you have nothing to fear.  Whilst this is true on one level – i.e., if you’ve never been in the business of shovelling your millions into a numbered Swiss account – it is deflecting from the real truth on another level.  What the US government is doing is breaching privacy rules, violating a human’s right to confidentiality and stealthily taking invasion of your privacy to a whole new level.

Financial experts are already discussing where they believe the government will look next for a revenue boost – international hedge fund investors are likely to take the brunt – and so you see this is just the beginning.  First they strip your rights away from you, then they take what they want.  It’s all about control my friends – the American government wants it therefore you can’t have it.

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  1. bowater October 2, 2009 at 8:30 am

    The French gov’t is preparing documents now that will demand that the US Banks reveal the names of the rich French citizens that have money in “secret” US bank accounts so they can be taxed in their home country.
    French citizens pay no tax in the US on gains made there.

    • Marc de Piolenc October 5, 2009 at 7:25 pm

      NONresident foreigners supposedly don’t pay US tax on US-earned income, but I understand that the US government is redefining residency to include an “economic presence,” which means that the USA’s status as a de facto tax haven is going to suffer.

  2. brek October 6, 2009 at 12:45 pm

    With the gov putting the squeeze on people, where does one put their savings? Putting the squeeze on offshore accounts could put a lot of pressure on gold. Where else does one put their savings? A good friend of mine got an inheritance few years ago. He doesn’t like banks. He took almost all his inheritance and turned it into gold and banks in his back yard. At today’s gold price he has almost tripled up in fed note value. And would you believe he gets no tax forms mailed to him and he has no trouble with the taxing authorities.

  3. Cynthia October 9, 2009 at 8:18 am

    That is the elitist Obama regime at work. Only he and his cronies in the white house want control over your entire life.
    If the idiots who gave money to his campaign are now being investigated , too bad.
    If you voted for the Obama Regime, now your stuck with it for the next horrific years, hopefully there will be a remnant of a Free America still left.

  4. Geoff Decker October 10, 2009 at 8:45 am

    while i agree with most of this article, i disagree with certain parts. our country’s most recent economic troubles started with the Clinton administration. really it can be traced back to FDR and the new deal, but for the purpose of my point it is the Clinton admin and the wholesale government buyout of the fannie mae and freddie mac mortgage brokers. the belief that giving all Americans rich and poor the ability to be homeowners drove us into the hole. with the fed now in control of the mortgage business they were free to create sub-prime mortgage rates so that people of any economic status could qualify for a loan, even though they could not afford to repay these loans. while it seemed like the plan was working while Clinton was in office, it was really just a growing bubble. the torch was passed to the bush admin and there it finally popped covering that admin in the Clinton administration’s mess. the average Americans attention span seems to be only about three to four weeks at best as is evidenced by how long the mass media continues to follow up on important issues. which brings me to my next point. Obama…. this man’s actions are criminal. and it was a shame that the majority of Americans fell for his pre election lies. it is the sole purpose of this current admin to get as many Americans reliant on the federal government and it’s social programs that they have no choice but to allow the feds to have free reign. this man (Obama) claims to be a democrat but in practice he is a devout socialist, bordering on full communist. how after enacting so many social programs, free health care, bailing out banks and the auto industry how can he possibly keep his promise to not raise taxes?? then he claims to only raise taxes on individuals who make $250,000 or more. so one of the first actions in his new administration was to attack offshore banking and the ones hiding their hard earned money. then allow a few months to pass so most Americans forget that he is cracking down on offshore banks and enact stage two. raise taxes. why else would you target offshore banks first?? because once the rich are thrown into a ridiculous tax rate of 50-60%!!! they would be crazy not to hide their money offshore. but alas there accounts now have to be disclosed. funny how the order of things went. imagine having to make a million to keep a million!! that’s crazy and who would blame the for hiding their money from a corrupt and fiscally irresponsible government. America claims to be a supporter of free market and capitalism but it seems like all we can do is force other countries to follow us or we will enact sanctions and take away much need economic support. this is not free market capitalism but communism in sheep’s clothing. less then half the countries we support financially actually provide us with something in return as far as commodities or exports. so why do we support them?? we support them so they won’t act up and speak out against us in the world markets. what America needs more then anything right now is to adopt a libertarian minarchist approach towards our own government and the way we deal with the world markets. who are we to tell other countries how to run there banks let alone the way they operate their day to day operations?

  5. Nick October 10, 2009 at 6:37 pm

    The author is missing the point. Its not about the government spending our taxes fairly, its about the government taxing us at all. It is fundamentally wrong.

  6. cheryl October 10, 2009 at 9:33 pm

    The author does not have her facts correct – it wasn’t Mr. Bush who went looking for offshore monies first (U.S., that is), it was Mr. Clinton! My brother is one of those who was hounded by the Clinton guys – I mean, SOMEONE has to supply the funds for our big giveaway programs, so the line of thinking was ‘let’s round up the hidden dollars, boys!’ If my reasoning is correct, the dollars that go into my bank account have already been taxed. Whose business is it, anyway, where I decide to store my remaining funds???

  7. Jake October 13, 2009 at 3:05 am

    Cynthia – Excuse the blunt response, but you’re an idiot. As Susan wrote, this is not a partisan issue (nor is it a new issue). Obama is doing very little that any other President hasn’t already tried to do. Part of it is done as a scare tactic and part of it is the false promise of reform. As Susan stated, “Tax evasion is a crime; legitimate taxation optimisation is not.” Obama and members of Congress from both sides of the aisle know where their campaign funds come from and wouldn’t be stupid enough to completely close the “taxation optimisation” options available to their contributors. There are examples abound that prove this, but you won’t find that reported on the evening news (especially your beloved Fox, I’m sure).

  8. Gaz October 24, 2009 at 3:47 pm

    Switzerland is not the best location for your assets, Swiss bank accounts are expensive to operate and are high profile targets. And as some commentators have suggested over the years, ¨Swiss banking is like Swiss cheese – full of holes¨. Swiss numbered accounts with no one knowing your name (even the bank) do not exist except in the wet dreams of the screen writers guild. Most people get their impressions of Swiss banking from Hollywood and Swiss banking as portrayed by the movies is complete bullshit.

    Simply speaking, IRS cannot pressure a Swiss bank that does not do business within the USA as they have nothing to bargain with. So, some simple advice, do not put any money in an offshore bank that maintains branches or has significant investments in the USA. Those with any money in UBS or Credit Suisse should change banks immediately. If you still want a Swiss bank, then go for one of the Kontonal banks and not one of the multi-national banking groups.

    This is neither the first time nor the last time the US Govt. or the IRS will make an attempt to get foreign account holders to fess up. So remember, ¨loose lips, sink ships¨ – so keep your mouth shut and repeat after me ¨I am not a slave of any state; I am a sovereign individual¨.

  9. auditor09 November 3, 2009 at 1:20 am

    I agree with GAZ…I had just a general savings account with a cantonal bank. The US Govt. has no bargaining power (or as I like to call it bullying power) in this situation as long as they do not have any ties with the US (branches or significant investments). What I do not agree with is the IRS & Congress making out that anyone who has a “secret” account is a crook. My account was a numbered savings account for privacy reasons. Privacy is the word I like most. I put already taxed funds into my Swiss savings account for safety reasons (even with the crappy interest rate) and privacy. I do not trust our banks…look how many have failed this year in the US. How many have failed in Switzerland?????

    If you want a listing of Swiss Banks to research go here:

    As always…be honest and pay your taxes if you owe them.

  10. matt January 14, 2010 at 11:38 am

    I want to incorporate a business indentity offshore. I need to know the best place to do it with the most secrecy and security. Any info may be useful.

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