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I.R.S. to Drop Suit Against UBS Over Tax Havens – NYTimes.com

August 27, 2010 By Leave a Comment

The Internal Revenue Service said Thursday that it would drop a closely watched civil lawsuit against the Swiss bank giant UBS after the Swiss government said it was on course to hand over details on thousands of American clients suspected of using their accounts to evade taxes.

The I.R.S. said it had received details on 2,000 clients so far and expected to receive information on the remaining 2,450 this fall.

While that is past the Tuesday deadline set in an August 2009 deal between Switzerland and the I.R.S. for the 4,450 names, the agency said it was confident of the country’s intentions to comply with the agreement announced by Swiss officials on Thursday.

The statement by the I.R.S. puts to rest a serious headache for UBS, the world’s largest private bank, and for Switzerland over offshore private banking services that enabled wealthy Americans to evade taxes.

via I.R.S. to Drop Suit Against UBS Over Tax Havens – NYTimes.com.

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New Legislation Will Curb How Multinationals Can Use Foreign Tax Credits | National Law Journal

August 17, 2010 By Leave a Comment

International tax lawyers are scrutinizing a state and local funding bill signed by President Barack Obama on Aug. 10 that significantly curbs how U.S. multinational corporations can use foreign tax credits.

The administration bills the changes as closing international tax loopholes for multinational companies. In practice, they’ll significantly change big companies’ tax decisions and have a far-reaching impact on foreign corporate transactions.

The provisions’ effective dates range from immediately to the tax filer’s first taxable year that starts after Dec. 31, 2011.

via New Legislation Will Curb How Multinationals Can Use Foreign Tax Credits.

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Swiss Parliament Approves Tax Deal With U.S. in UBS Dispute

June 15, 2010 By Leave a Comment

The Swiss parliament today approved a treaty with the United States that will hand thousands of files on suspected tax cheats to U.S. authorities, but obstacles remain that could delay the deal for several more months.

The government hopes the agreement will eventually end UBS AG's three-year battle with U.S. tax authorities that culminated in revelations the bank had for years helped American clients hide millions of dollars in offshore accounts.

Under the treaty that was painstakingly crafted by Bern and Washington last year after months of negotiations, Switzerland has agreed to divulge the names of 4,450 UBS clients suspected of tax evasion.

Swiss authorities have already transmitted the names of about 400 UBS clients who signed waivers as part of the Internal Revenue Service's voluntary disclosure program, according the Swiss Federal Tax Administration. A further 100 UBS clients gave their consent directly to Swiss authorities.

Lawmakers in Switzerland's lower house voted 81 to 61 in favor of the government-backed deal, and 53 abstained.

The vote passed after the powerful Swiss People's Party dropped its opposition. The nationalist party and the left-wing Social Democrats blocked a first attempt last week to have parliament approve the treaty, which has been portrayed by some as a nail in the coffin for Swiss banking secrecy.

via Swiss Parliament Approves Tax Deal With U.S. in UBS Dispute.

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How Altria Is Winnowing Out Fake Marlboros – BusinessWeek

April 12, 2010 By

Cigarette smuggling is booming, in part because New York and 21 other states have raised cigarette excise taxes in recent years. On top of that, the U.S. government increased the federal tax on cigarettes last year by 159%, to $1.01 per pack. A pack now typically sells for about $10 in New York City, more than double what it cost 10 years ago, and the state is considering yet another excise increase.

The high levies, meant to help close huge budget gaps and discourage smoking, have had the unintended side effect of spurring the illicit market. One passenger car filled with Marlboros bought in low-tax Virginia and driven up Interstate 95 to resell in New York can yield more than $30,000 in profit, says Crisanto Perez, a senior official with the U.S. Bureau of Alcohol, Tobacco, Firearms, & Explosives.

In Asia, Altria employees have begun to build an intelligence network to combat the counterfeiting problem. The company cites academic research estimating that factories in China manufacture 400 billion knock-off cigarettes a year. Altria has hired detectives to try to infiltrate the international distributors that sell Chinese fakes to mom-and-pop shops in the U.S. The company says it will funnel the information it gathers to government authorities.

Back in the U.S., Altria has 21 employees in its brand integrity unit, which it created in 2002. They are assisted by outside contractors hired nationwide. The company even has given nearly $2 million over the past eight years to cash-strapped public police departments in such places as Los Angeles and Suffolk County, N.Y., to help fund contraband investigations.

Tax collectors have their own concerns. New York currently loses $1 billion a year because of cigarette tax cheating, according to a 2009 study by the New York Association of Convenience Stores. Across the country, tobacco excise revenue lost annually to smuggling totals $5 billion, the U.S. Justice Dept.'s Inspector General concluded last year.

via How Altria Is Winnowing Out Fake Marlboros – BusinessWeek.

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HIRE power: new reporting requirements and penalties for holders of offshore bank accounts | Lexology

March 30, 2010 By

Holders of offshore bank accounts, along with their accountants and tax advisors, should be aware of recently enacted changes in their reporting requirements. Under the HIRE Act signed by President Obama on March 18, individuals are required to include certain information with their tax returns beginning with the 2011 tax year. The newly required information reporting is in addition to the information already provided to the U.S. Treasury Department on the Form 90-22.1 (“FBAR”).

The scope of the new reporting requirement is greater than what is currently covered on the FBAR. Therefore, individuals who have never had an FBAR filing requirement may be subject to the reporting requirement, and individuals who are familiar with FBAR filing requirements may have to provide additional information. Taxpayers should be aware of the new information that is subject to reporting and the applicable penalties for failing to report the information.

Assets Subject to Reporting

Any of the following assets may be subject to reporting if the value of all of the specified assets held by the taxpayer is greater than $50,000:

Any financial account maintained by a foreign financial institution.

Unless regulations provide otherwise, this could include a bank account maintained with a U.S. branch of a foreign financial institution.

Investments with foreign private equity or hedge funds may need to be reported.

Stock or securities issued by a non-U.S. person.

Any financial instrument or contract held for investment that has an issuer or counterparty that is a non- U.S. person.

Interest rate and other swap agreements, futures and forward contracts, and other derivatives to which a foreign entity is a party could be subject to reporting, regardless of whether the instrument is considered to be a “foreign” instrument.

via Lexology – HIRE power: new reporting requirements and penalties for holders of offshore bank accounts.

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On Strip Bars and the Constitution – Law Blog – WSJ

March 26, 2010 By

As far as “sin taxes” go, it seems fairly clear that governments can levy them on cigarettes and booze. Earlier this year, after all, a new federal tax pushed the cost of a pack of smokes to over $9 here in NYC.

But may a state enact a tax on a different kind of “sin” — the kind committed by patrons of strip bars?

On Thursday, the issue was argued before the Texas Supreme Court. The main concept up for debate: whether Texas’ “pole tax” on strip clubs’ patrons runs afoul of the First Amendment’s freedom of expression. Click here for the WSJ story, from reporter Leslie Eaton.

The case arrives after rulings from two lower courts, which found the law, which imposes a $5-per-fee visit on strip clubs, unconstitutional. The rationale: that singling out a particular business based on the content of its expression — like “exotic dancing” — violates the First Amendment.

Texas disagreed, and filed an appeal. The state argues that it isn’t levying the fee to discourage pole dancing. Instead, the state says, by deterring people from going to clubs, the fee would help reduce rapes that it claimed are linked to drinking alcohol while watching dancers disrobe.

The law’s chief sponsor, Ellen Cohen, a Democrat from Houston who is former director of the Houston Area Women’s Center, said in a brief filed with the court that her aim was to combat sexual assault.

via On Strip Bars and the Constitution – Law Blog – WSJ.

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Swiss Government Asks UBS to Pay Legal Costs in Tax Dispute With U.S.

February 26, 2010 By Leave a Comment

The U.S. may have trumped Switzerland in Olympic men’s hockey on Wednesday, but its tax battle with Switzerland continues.

Swiss news agencies reported on Wednesday that the government would ask Zurich-based banking giant UBS to reimburse it for outside legal costs stemming from the bank’s long-running legal dispute with U.S. authorities over allegations of tax evasion by U.S. citizens holding UBS accounts.

A deal to resolve that dispute by releasing the names of 4,450 U.S. citizens with UBS accounts was tentatively struck last August. UBS relied on lawyers from Wachtell, Lipton, Rosen & Katz, Cravath, Swaine & Moore and Florida’s Stearns Weaver Miller Weissler Alhadeff & Sitterson in those negotiations, while the Swiss government retained Pillsbury Winthrop Shaw Pittman international trade practice chair Stephan Becker and Palm Beach, Fla.-based attorney John Dotterrer on the matter. (UBS also paid a $780 million fine and agreed to turn over nearly 300 client names as part of a deferred prosecution agreement it struck with U.S. prosecutors in February 2009.)

According to Swiss news reports, the dispute between U.S. regulators and UBS has so far cost the Swiss government $2.3 million. UBS has agreed to reimburse the government, which hired Becker and Dotterrer to file briefs in federal court in Florida defending the bank, more than $931,000 of that $2.3 million. The Swiss could eventually incur another $34.4 million in costs as a result of helping U.S. authorities track down American tax evaders. (It's unclear at this point how much of those costs relate to legal fees paid to outside lawyers; Becker and Dotterrer did not respond to requests for comment.)

via Swiss Government Asks UBS to Pay Legal Costs in Tax Dispute With U.S..

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H-P snagged in IRS foreign tax crackdown – MarketWatch

February 18, 2010 By Leave a Comment

Hewlett-Packard Co. has become an unlikely member of a group of companies targeted by the U.S. Internal Revenue Service in a coordinated legal assault on suspect international tax credits.

H-P  is one of roughly a half-dozen firms, nearly all in the banking and insurance industries, now ensnared in the IRS&’s “three-and-out” litigation strategy targeting so-called foreign tax credit generators, experts say. The IRS has pegged a handful of such cases as promising enough to pursue, in hopes of winning at least three decisions in a row — and thereby gaining a more solid legal footing on the issue.

“Usually the government does a good job of starting with cases that are very weak for the taxpayer, and developing law,” said University of Southern California Law Professor Edward Kleinbard.

Foreign tax credit generators are investments by U.S. companies that earn income and result in taxes overseas. Companies can then claim foreign tax credits, to offset their tax payments in the U.S. However, the IRS alleges that many are designed to unnecessarily load up on foreign tax credits, and create an artificial financial benefit.

via H-P snagged in IRS foreign tax crackdown – MarketWatch.

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Swiss seek solution to German bank data spat | Reuters

February 4, 2010 By Leave a Comment

Switzerland said on Wednesday it would not help Germany hunt tax cheats on the basis of stolen Swiss bank data but hoped to finalise a new tax deal with Berlin by the end of March.

Germany has said it is prepared to pay an informant for data on clients of Swiss banks who may have been using secret accounts to evade German taxes, a new blow to Switzerland’s massive private banking industry.

“Germany is Switzerland’s most important trade partner…. With this in mind, the Federal Council wishes to resolve the problem of the stolen data which has been offered for sale to the German authorities,” the government said in a statement.

“It wants to pursue talks with Germany. Nonetheless, it will not provide administrative assistance based on stolen data, even to Germany.”

Switzerland moved to calm the sharply escalating row with its northern neighbour a day after the Swiss banking lobby said Berlin was acting as a receiver of stolen goods.

Swiss Finance Minister Hans-Rudolf Merz told a news conference he hoped talks with Germany on a new tax deal to help Berlin catch tax evaders in Switzerland would be wrapped up by the end of March.

Germany had already paid for stolen data in 2008 when it purchased information stolen from Liechtenstein’s top bank LGT, forcing the tiny principality to give up bank secrecy rules.

via UPDATE 1-Swiss seek solution to German bank data spat | Reuters.

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