Honesty has prevailed! More than 14,700 U.S. taxpayers have recently come forward to disclose billions of dollars in offshore bank accounts under a voluntary (yes, voluntary) Internal Revenue Service program.
The Internal Revenue Service (IRS) recently gave U.S. taxpayers the opportunity to be part of a program that gave individuals who hold offshore bank accounts the opportunity to disclose their situation with the opportunity for most of them to avoid criminal prosecution as long as they pay what they owe. An incredible 14,700 individuals took advantage of the program and billions of dollars in offshore accounts in more than 70 countries was divulged.
The program expired on October 15, and the IRS saw many people coming forward in the days before the deadline. In a typical year, only about 100 individuals come forward to disclose offshore accounts; with this year’s program in place, nearly 15,000 people stepped up. The program came amid an expansive U.S. crackdown on international tax evasion at Swiss bank UBS AG and other international institutions; in fact, the disclosures involved accounts on every single continent except Antarctica.
IRS Commissioner Doug Shulman said, “To put it simply, this is a historic milestone for the nation’s hardworking taxpayers.” What brought about this change of heart in taxpayers with offshore accounts? Was the amnesty program really the only motivator? While it certainly was part of it, it is believed that the copious amounts of individuals that came forward was in large part due to an agreement made in August between the U.S. and Switzerland to obtain the names of approximately 4,450 US taxpayers who were believed to be hiding assets in secret accounts. Give your name before it’s given, right?
Out of the 14,700 individuals who came forward, seven of them have been criminally charged, and at least two of them are beings sentenced to prison time. Shulman is optimistic about the outcome of the program and indicates that the collaboration between UBS’s disclosures and the amnesty program the offshore tax landscape has been fundamentally changed, which is incredible progress considering Switzerland’s traditional bank secrecy. “It shows we are serious about piercing the veil of bank secrecy. The whole game has changed,” he said.
In addition to the enormous outpour of offshore account disclosures, on Tuesday the IRS and the Swiss revealed the criteria which is being used to determine which American UBS accounts will continue to be unveiled under the August agreement. Accounts that have been, and will continue to be, targeted will include those that contain 1 million or more Swiss francs at any time between 2001 and 2008, accounts that demonstrated fraudulent actions such as false documents, and accounts that earned an average of 100,000 francs a year for at least three years.
Some critics, including U.S. senator Carl Levin, believe that the criteria are not extensive enough and called them “disappointing” because it is believed that some of Switzerland’s bank secrecy will remain intact. He adds, “[The criteria] complicates and middles what should have been a straight forward agreement by UBS and the Swiss government to disclose Swiss accounts hidden from the Unites States by U.S. account holders.” Whether or not the criteria are “fair,” they are what they are, and debates are sure to be sparked with regards to whether they can be further tightened to accommodate certain people’s wishes, or if Switzerland will remain the leader in bank secrecy, a tradition many love about Switzerland.
The Swiss government and UBS have until the end of August 2010 to hand over the final list of names to the U.S. government and approximately 500 names are said to be already ready to be listed by the end of November. It’s reported that any taxpayer who is picked up for disclosure does have the option to appeal to Switzerland’s top administrative court. The situation is clearly far from over.