Did you avoid paying taxes thanks to your UBS advisor? Look out!

By: ispeculatornew
Date posted: 08.03.2009 (5:00 am) | Write a Comment  (0 Comments)

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dscn1358aThese are interesting times for everyone rich enough to consider “alternative incomes” that would include offshore bank accounts. There are so many ways of doing it, most of them being in gray zones between being legal and illegal. It is very interesting of course because we are currently in the middle of a battle between the Swiss and US governments with Swiss bank UBS stuck in the middle.

The basic story is that the Swiss bank helped thousands of US citizens avoid paying taxes to the US government often through very questionable solutions that basically involved hiding income and assets. The US government started pursuing legal actions and demanded that UBS disclose the full records of its clients. The response came from the Swiss government who said that giving out such info would be illegal according to Swiss law. The matter is still being debated and it is unclear what the outcome will be but clearly many clients are very scared.

So much so that in fact over 400 clients gave themselves up last week, more than in the entire last year. These citizens face reduced penalties by going forward instead of waiting for the US government to find proof of wrongdoing. There is no doubt that this is a landmark case and could have quite an impact on international banking but in the meantime it’s easy to understand citizens choosing financial penalties instead of the possibility of jail among other possible fines. The problem is widespread and has been one of the main focuses of industrialised countries over the past few months as they try to isolate countries that facilitate such manoeuvres.

I personally think there are so many legal ways to diminish taxable income that I consider it somewhat foolish for citizens to act illegally in order to save income tax. After all, anyone making enough money to go through such extreme measures can surely pay a little more taxes in order to be legal, don’t you think? But on the other hand, I think that this issue is a lot more complex than most people would assume and automatically faulting those guilty is a very easy way to look at the issue. The reality of course is that you could have some attorneys from both the private and public sector meet and be unable to reach clear conclusions, it really is that complex.

Just to update: Since starting this article, there seems to have been an agreement between the US and Swiss governments although the terms have not been made public yet but we should hear more very soon.

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