Oh Those Credit Suisse!

Yet another Senate report, yet another bank is busted for tax evasion.  The Senate permanent subcommittee on investigations has released a report on Credit-Suisse bank detailing their systemic offshore tax evasion of U.S. funds.  Generally speaking Switzerland is a well know tax haven and in spite of government efforts, even today Switzerland roadblocks the United States in collecting on unpaid taxes.  Credit Suisse has opened offshore accounts for 22,000 U.S. citizens with an estimated $10 to $12 billion in assets, of which 95% of these assets have not reported or paid any taxes to the IRS.  The Senate is calling out Credit Suisse for aiding and abetting U.S. tax invaders.  The United States cannot even get the account holder names.  Out of the 22,000, the United States has only 238 names associated with the accounts at Credit Suisse.

Tax evasion and money laundering is simply part of doing business for these multinational banks.  The last one who in the end faced little consequence was HSBC.

Senator Carl Levin on the report findings:

  1. Bank Practices that Facilitated U.S. Tax Evasion. From at least 2001 to 2008, Credit Suisse employed banking practices that facilitated tax evasion by U.S. customers, including by opening undeclared Swiss accounts for individuals, opening accounts in the name of offshore shell entities to mask their U.S. ownership, and sending Swiss bankers to the United States to recruit new U.S. customers and service existing Swiss accounts without creating paper trails. At its peak, Credit Suisse had over 22,000 U.S. customers with Swiss accounts containing assets that exceeded 12 billion Swiss francs.
  2. Inadequate Bank Response. Credit Suisse’s efforts to close undeclared Swiss accounts opened by U.S. customers took more than five years, failed to identify how many were undeclared accounts hidden from U.S. authorities, and fell short of identifying any leadership failures or lessons learned from its legally-suspect U.S. cross border business.
  3. Lax U.S. Enforcement. Despite the passage of five years, U.S. law enforcement has failed to prosecute more than a dozen Swiss banks that facilitated U.S. tax evasion, failed to take legal action against thousands of U.S. persons whose names and hidden Swiss accounts were disclosed by UBS, and failed to utilize available U.S. legal means to obtain the names of tens of thousands of additional U.S. persons whose identities are still being concealed by the Swiss.
  4. Swiss Secrecy. Since 2008, Swiss officials have worked to preserve Swiss bank secrecy by intervening in U.S. criminal investigations to restrict document production by Swiss banks, pressuring the United States to construct a program for issuing non-prosecution agreements to hundreds of Swiss banks while excusing those banks from disclosing U.S. client names, enacting legislation creating new barriers to U.S. treaty requests seeking U.S. client names, and managing to limit the actual disclosure of U.S. client names to only a few hundred names over five years, despite the tens of thousands of undeclared Swiss accounts opened by U.S. clients evading U.S. taxes.

The report makes great headlines, yet the United States has their own tax haven, the state of Delaware for one and has even passed trade treaties creating more of them.  Perhaps it is because the Swiss secret accounts are for individuals instead of corporations that has raised the Senate ire and no doubt it is wrong.  Yet while corporations manipulate the U.S. tax code into the stratosphere to avoid pay taxes, move production offshore and avoid hiring U.S. citizen workers at all costs, the entire attack on the Swiss seems hypocritical.

Here is what Senator Levin wants to see enacted to finally bust the Swiss and their American customers.  Notice the Department of Justice comments.

  1. Improve Prosecution of Tax Haven Banks and Hidden Offshore Account Holders. To ensure accountability, deter misconduct, and collect tax revenues, the Department of Justice should use available U.S. legal means, including enforcing grand jury subpoenas and John Doe summons in U.S. courts, to obtain the names of U.S. taxpayers with undeclared accounts at tax haven banks. DOJ should hold accountable tax haven banks that aided and abetted U.S. tax evasion, and take legal action against U.S. taxpayers to collect unpaid taxes on billions of dollars in offshore assets.
  2. Increase Transparency of Tax Haven Banks That Impede U.S. Tax Enforcement. U.S. regulators should use their existing authority to institute a probationary period of increased reporting requirements for, or to limit the opening of new accounts by, tax haven banks that enter into deferred prosecution agreements, non-prosecution agreements, settlements, or other concluding actions with law enforcement for facilitating U.S. tax evasion, taking into consideration repetitive or cumulative misconduct.
  3. Streamline John Doe Summons. Congress should amend U.S. tax laws to streamline the use of John Doe summons procedures to uncover the names of taxpayers using offshore accounts and other means to evade U.S. taxes, including by allowing a court to approve more than one John Doe summons related to the same tax investigation.
  4. Close FATCA Loopholes. To obtain systematic disclosure of undeclared offshore accounts used to evade U.S. taxes, the U.S. Treasury and IRS should close gaping loopholes in FATCA regulations that have no statutory basis, including provisions that allow financial institutions to ignore account information stored on paper, and allow foreign financial institutions to treat offshore shell entities as non-U.S. entities even when beneficially owned and controlled by U.S. persons.
  5. Ratify Revised Swiss Tax Treaty. The U.S. Senate should promptly ratify the 2009 Protocol to the U.S.-Switzerland tax treaty to take advantage of improved disclosure standards.

It is great news that this is a bi-partisan effort to nail the super-rich for tax evasion, yet by the numbers the real money is with multinational corporations.  The day we see legislation on multinationals rigging the game, offshore outsourcing money and jobs is the day the budget deficit might finally see some real IRS revenue relief.