Swiss Considering Referendum on Law That Would End Tax Dispute With the U.S.

June 15, 2010 by David S. Seltzer

As a South Florida tax evasion criminal defense attorney, I wrote a great deal last year about a crackdown on U.S. taxpayers who fail to declare income from overseas bank accounts. That crackdown was sparked by revelations from an employee of Swiss bank UBS that the bank had actively helped U.S. clients avoid reporting income. As a result, the IRS launched a special amnesty program that offered lighter penalties for taxpayers who came clean before mid-October -- but promised harsh penalties for proven tax evaders. At the same time, a lawsuit from U.S. authorities required UBS to turn over the names of tax evaders, which caused controversy in Switzerland’s famously secretive banking community. Now, the New York Times reported Jun 15, the Swiss Parliament has approved a deal that would end the international dispute -- but wants to put it to a popular vote, putting the outcome in doubt.

Switzerland agreed in August of 2009 to turn over 4,450 names, to settle a lawsuit brought by the U.S. Justice Department. But the Swiss high court ruled that parts of the settlement violated Swiss banking law, so the country’s legislature had to approve changes to the law in order to comply with the settlement agreement. The upper house of the Swiss Parliament has already approved the law but not a referendum; the lower house approved both. Now, the upper house must hold another vote, and if the two houses can’t agree, the settlement agreement could be broken. The referendum, if it passes, would take months, with no guarantee of a vote that would confirm the settlement agreement. That means there will certainly be some delay before the 4,450 names are turned over, keeping all of those U.S. taxpayers in further suspense despite nearly a year since the agreement was reached. If the Swiss government and people can’t meet their obligations, the Justice Department could take further legal action.

For taxpayers with UBS accounts who are not eager to see their names given to the IRS, this delay could be a relief. But it’s only a temporary relief, and as a Miami tax evasion criminal defense lawyer, I urge taxpayers who think they might be on that list not to ignore it. The IRS has already signaled that it intends to deal harshly with people who it thinks intentionally evaded their taxes, a crime that brings up to five years in prison and steep fines that can exceed the amount of income not declared. By contrast, the IRS was gentle last year with people who voluntarily disclosed undeclared income ahead of an Oct. 15 deadline, promising a low possibility of prison and fines of 5 to 60 percent of the undeclared income. The voluntary disclosure program was extremely popular -- so much that the IRS extended it an extra month -- and brought in accountholders at other overseas banks as well as UBS clients.

Presumably, all of those voluntary disclosers felt that staying silent wasn’t worth the risk of being identified and harshly prosecuted. Many people with overseas accounts rely on their accountants or the relatives who once owned the accounts for information on taxes. Some may not have realized they were doing anything illegal, especially since UBS admits that it actively helped clients hide their assets. The IRS may deal less harshly with those people -- but only if it believes they were acting in good faith. Voluntary disclosure is one way to show good faith and secure a promise of more lenient treatment.

However, it’s important to realize that voluntary disclosure can require more interactions with the IRS as it verifies your paperwork and evidence of good faith. That’s why many voluntary disclosers in 2009 hired Fort Lauderdale tax evasion criminal defense attorneys like me. An attorney can help clients determine which documents and information must be disclosed to the IRS. Clients may also want a defense lawyer by their sides as they sit through the in-person interviews with the IRS that were frequently required during last year’s voluntary disclosure program. And of course, an experienced tax evasion criminal defense lawyer can help clients confused by our Byzantine tax code decide whether they need to disclose in the first place. But to do this successfully, taxpayers must approach the IRS before it approaches them, because a voluntary disclosure won’t be honored if it comes after the taxpayers find out they’re under investigation. So it’s essential to get started as soon as possible -- before the Swiss government can approve its settlement.

If you’re considering a voluntary disclosure or are concerned that you might be under investigation for tax crimes, don’t wait before calling Seltzer Law & Associates. For a confidential and free consultation, call me at 888-THE DEFENSE (888-843-3333) or send me a message online.