Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

    On the way offshore. Photo ET

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

A Tax Justice Network compilation, from a Latin American angle. The numbers are staggering, and though G20 gets a reputation of doing nothing, I beg to differ a bit. G20 will act more and more, because governments spend more than they take in. They need the money! However it will take a long time.

Remember how slowly they acted on global financial crimes, such as money laundering, or corruption? FATF standards, (the Financial Action Task Force of OECD), find broad acceptance today, and international pressures on tax havens have accelerated their implementation. The US Foreign Corrupt Practices Act, FCPA, and its cousin, the UK Bribery Act 2010 set standards too, that many international corporations elect to follow and comply with. It eventually will evolve into a commonly accepted standard.

The tax matters are way more complicated. The battle lines are drawn between the concepts of tax evasion and tax avoidance, between thousands of tax agents and even more tax advisers, and many ambiguities will persist and be fought out in Courts. Jurisdictions will clash, as we have seen with Dolce and Gabbana.

Eventually, everyone should have a closer look at FATCA, the US Foreign Account Tax Compliance Act, the quasi obligation for every foreign bank to comply with a long arm US regulation. Its basic unspoken premise is that a US resident, citizen and corporation are taxed on worldwide income. There is no escape. Of course any bank active internationally has to sign up through one or the other model of reporting. But here is the news: some countries elect to report for all its banks through an "Inter Governmental Agreement" with the US. Logically they should also negotiate reciprocity, unless for some reason they forgo the opportunity. However, more and more of the European countries adhere to the idea to develop mutual FATCA type agreements between themselves. The train is rolling... towards a worldwide mutual reporting world, 192 countries reporting 2 by 2!

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

Swiss deals complicate EU tax negotiations by Swissinfo.ch

Switzerland played this well. It leaves the former allies Luxembourg and Austria in the rain. The pressure is on them and it will be difficult for them to invoke these bilateral agreements with Switzerland to nix the former agreements on automatic information sharing in the Union. These did only allow for a transitional exception to automatic information sharing for Luxembourg and Austria.

It is true that this is revisiting past understandings: that was that ALL tax havens would move to the SAME system. Not as the un-elected Commissioner seems to say: to SIMILAR arrangements.

However, how urgent is this subject now that Euro zone is on fire and will either have to do a costly bailout or allow a costly collapse of the Euro? The funny thing is, it has become less of a Greek problem than a creditor's problem, according to the old saying: you owe the bank one million, and the bank owns you. You owe the bank one billion, and you own the bank.

http://www.swissinfo.ch/eng/Specials/Rebuilding_the_financial_sector/News,_results,_regulations/Swiss_deals_complicate_EU_tax_negotiations.html?cid=31129410

Switzerland, UBS, the OECD's Grey List, Roman Polanski and Guantanamo

Seven hundred years of Swiss history are accelerating. News agencies traditionally were used to a placid pace when it comes to news from Switzerland. No more! Consider these:

1. UBS

We have witnessed UBS in a Titanic-like voyage to America, hitting the Iceberg called IRS. We know the outcome, or let's reconsider that: we don't yet know all the consequences. Just this week, as the WSJ reported, a certain Juergen Homann admitted in Federal Court in New Jersey to concealing more than $5 million in accounts at Swiss banks, including UBS. Homann faces a maximum sentence of five years in prison. He is the fifth UBS client to plead guilty in the US to tax evasion. May I suggest that this is only the tip of the iceberg. (1)

2. OECD's Grey List

In other news, Switzerland rushed through 12 double taxation agreements, just like Luxembourg did, to get off the OECD's Grey List. And OECD promptly erased the black spot on Switzerland's white coat, that is taking Switzerland off the Grey List without even waiting for ratification by Swiss legislative instances. Is OECD's complacent behavior a signal that they already dismiss the importance of their very own standard, knowing that there is much more to come under the G20 push or just simply from the US, France and Germany?

3. Roman Polanski arrested in Zurich

According to CNN: " Filmmaker Roman Polanski has been arrested in Switzerland on an arrest warrant issued 31 years ago in connection with a rape charge.

The Academy Award-winning director pleaded guilty in 1977 to having sex with a 13-year-old girl in the United States, but fled the country before he could be sentenced. Authorities in the United States issued a warrant for his arrest in 1978. He was taken into custody on Saturday, Zurich police said." (2)

4. Switzerland ready to accept Guantanamo prisoners

In other news, AP reports about Switzerland being "interested" in accepting four Guantanamo prisoners. According to AP, "the Swiss Justice Ministry says officials visited the U.S. detention center at Guantanamo Bay, Cuba, last month to gather information on inmates the Alpine country is considering taking in when they are released. "

"... Zurich weekly SonntagsZeitung reported that the four inmates in question were two Chinese Muslims — or Uighurs — an Uzbek national and a Palestinian." (3)

In the meantime though, Swiss cantonal authorities have demanded that the four inmates' innocence has first to be formally established, before admitting them in their communities. Interesting how the world has declared all Guantanamo prisoners as "innocent' while they are in Guantanamo, but need formal proof of their innocence before accepting them as refugees.

5. What is the link between the above?

None whatsoever.

Some may ask the question if after 700 years the Swiss came full circle, starting again to bow to Gessler's hat on a pole? You'll hear the denial from the horse's mouth: separation of powers, commitment to international standards among others and in four languages.

The reality for Switzerland is the same than for Luxembourg, Austria, Cayman, Bermuda and about 70 other jurisdictions: the powers out there need the money and you have it. Ill gotten they say. Economic refugees you may say. There is a need for compromising, or get it pushed down your throats. The OECD standard double taxation agreement will not be that compromise.

Egide Thein

(1) http://online.wsj.com/article/SB125392067799142507.html?mod=googlenews_wsj

(2) http://www.cnn.com/2009/SHOWBIZ/Movies/09/27/zurich.roman.polanski.arrested/index.html

(3) http://www.wlox.com/Global/story.asp?S=11163258

Switzerland: Swiss set for flood of UBS cases after US deal.

The Financial Times today reported that the Swiss expect about 500 challenges to the UBS agreement to share 4500 names with the IRS to be filed by year end.

www.ft.com/ubs

Not surprising. Didn't UBS expect this? Didn't the Swiss Government expect this? I hope no one was naive to the point of not expecting any kind of reaction on behalf of the duped customers.

How justice will be served in Switzerland, will be the next question. If internationally it is perceived to be too soft on UBS, it will be labeled as biased. The world will draw the conclusion that Swiss banks don't protect their customers. If ever that conclusion is not yet drawn.

If the outcome is viewed as just right, meaning it seriously repairs the customers' prejudice, it risks to bankrupt UBS or at least its reputation or what is left.

This is without talking about the other threat, that probably needs some time to develop, legal action from the duped clients in the US. I touched a word in my post of July 13, 2009.

http://egidethein.blogspot.com/2009/07/switzerland-luxembourg-other-offshore.html

The US "victims" of the fatal chain reaction: UBS solicitation - promise of confidentiality and secrecy - tax evasion - UBS' disclosure of clients' names to the IRS, could conceivably have an after play in US courts. UBS has important activities in the jurisdiction, it sent their private bankers to solicit clients, and the clients are residents. These elements could probably be sufficient to bring legal action in the US. One has only to wonder about the strange situation, where two parties in a crime, UBS and the client together committing money laundering and tax evasion, can sue one another for breach of contract.

UBS in front of a US jury? Good luck!

Egide Thein