U.S. Clients at Risk of Exposure
By David S. Hilzenrath, Washington Post Staff Writer

Swiss banking giant UBS, under investigation by the U.S. government for allegedly helping Americans hide money from the Internal Revenue Service, is closing thousands of accounts, putting clients at greater risk of being exposed, tax lawyers say.

UBS clients have been receiving calls and letters telling them that their Swiss accounts will soon be liquidated. Those who have concealed funds from the IRS have two basic choices: They can take new and potentially difficult steps to hide the money, heightening their risk of being caught and punished severely, or they can come clean, lawyers say.

The backdrop for UBS’s action is that the U.S. government has been pressing UBS and the Swiss government to disclose the names of thousands of Americans with undeclared accounts, while the Swiss have vowed to uphold Swiss legal protections for bank clients.

However, as a practical matter, whether or not the Swiss formally give up the names, UBS’s decision to close the accounts undermines Switzerland’s legendary code of bank secrecy, lawyers said.

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By Carlyn Kolker and Ryan J. Donmoyer
Nov. 12 (Bloomberg) — A top UBS AG official was indicted by a U.S. grand jury on one charge of conspiring to help 20,000 wealthy Americans hide assets from the Internal Revenue Service to maintain a “profitable” business for the Swiss bank. 

Raoul Weil, 48, chairman of global wealth management at UBS in Zurich, was indicted Nov. 6 in Fort Lauderdale, Florida, according to court papers unsealed today. His bank continued to help American clients evade taxes with false documents after agreeing in 2001 to identify account holders and tell the IRS about their income, the U.S. alleged.“Weil and other executives would not implement effective restrictions on the United States cross-border business because the business was too profitable for the Swiss bank,” according to the indictment, which identifies other, unnamed UBS executives as unindicted co-conspirators.

The Justice Department has been probing whether the bank helped Americans evade taxes and the U.S. Securities and Exchange Commission is looking into whether it failed to register as a broker-dealer or investment adviser. In June, former UBS private banker Bradley Birkenfeld pleaded guilty to helping a California billionaire dodge taxes and agreed to cooperate with prosecutors.

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by Jessie Hewitson, thenational.ae
Last Updated: October 20. 2008 8:39PM UAE / GMT 

Around the world, a quiet but fierce battle is raging. In a bid to lure high net-worth individuals to their shores, the world’s tax havens are trying to outrival each other with tax breaks. And the list of combatants is not a short one – according to the US National Bureau of Economic Research, roughly 15 per cent of countries are tax havens. While the UAE and Switzerland may be the first places that spring to mind, there are some unlikely new contenders such as Macedonia and Liechtenstein, among them.

“The definition of a haven is a place that is offering low to zero tax, I’d say,” says Paul Panayi, the managing director at Optimus Wealth, a wealth management company. “The name implies safety – in a storm you would want to find a haven. With increased competition from so many countries looking for high net-worth individuals, the tax perks on offer are getting better. The old money seems to stick with the places they know: Monte Carlo or Switzerland, for example – places where you pay an enormous amount of money for a property. There is a growing group emerging, however. People who have done well in business in the last five to 10 years but might not be super-wealthy and who are looking at some of the newer tax-friendly places – like Dubai, Mauritius and the Caribbean. Typically, people only reside at the tax haven for three to four years if they’re about to sell a business, or they know they are going to have a period of high earnings.”

“Monaco used to accept anyone, but not any more,” continues Panayi. “These days you have to guarantee you will be there for a year, as well as deposit a sizeable amount into a bank account – at least £500,000 (Dh3.2 million). They also do credit checks. In Switzerland, it varies from canton to canton; generally you turn up to the local tax office, strike a deal on the amount of tax you pay and pay that amount.”

The Caribbean is an enduringly popular location for the rich; somewhere they can live in idyllic, tropical surroundings, and save money while doing so. Bermuda, Barbados, the Bahamas, the Cayman Islands, Anguilla, Grenada, Nevis and the Turks and Caicos are all offering low tax to anyone who resides there. Typically, these islands offer no income tax, value added tax, capital gains or inheritance tax – and in some cases, no property taxes – but regional variations do occur.

Prices in Barbados, for example, are high: the cheapest one-bed property on Cluttons estate agency’s books starts at Dh3.7m and goes up to Dh7m. Barbados’s West Coast is seen as the most desirable – and priciest – area to live in, home to Sandy Lane, the celebrities’ hotel of choice, and to the Four Seasons resort, where Simon Cowell recently spent a rumoured Dh94m buying his holiday home.

There are cheaper alternatives, however. In Grand Bahama, which is tax-free and where you can qualify to apply for residency if you purchase a property, you can buy a one-bed in the Suffolk Court development – a 10-minute drive from Freeport International Airport – for Dh1.7m.

Another increasingly popular destination is Mauritius. It is only since 2002 that foreigners were allowed to buy on the tropical island in the Indian Ocean off the coast Africa, with astonishing beaches and rainforest – and only after the government had introduced a system called the Integrated Resort Scheme (IRS). IRS was designed to keep property relatively high-end: by law, non-Mauritians have to pay a minimum of Dh1.8million when buying on the island, as well as fork out a land registration tax of Dh257,000. The good news is that with your Mauritian property you automatically get residency – as do any dependents – and corporation tax is capped at 15 per cent.

The upside is that Mauritius has no capital gains or inheritance tax and its economy is strong – rising at around six per cent annually. On the downside, as a foreigner, you can only buy a newbuild property in a designated IRS resort, so if your dream is lovingly to renovate an old plantation house, this isn’t the island for you.

Average prices paid by foreigners on the island are around Dh2,571 to Dh3,122 per square metre. Cluttons is selling Villas Valriche, a development offering luxury villas with infinity pools and easy access to an 18-hole golf course. Prices in the hilltop development, with panoramic sea views in front and the Black River Gorge National Park to the rear, start at Dh3.11m for a detached villa with pool and gardens.

Switzerland is where the old money goes, and it is famously picky about who lives within its borders – Swiss property laws are designed to make sure the foreigners don’t nab all the best properties. The federal government has set an annual quota of permits for non-resident foreigners seeking to acquire property in Switzerland. In addition, cantonal authorisation is needed before gaining a title, and each canton has different rules on the issue. Average property prices in the country are Dh27,279 per square metre, according to the Global Property Guide.

“We have a huge variety of clients from all sorts of walks of life buying in Switzerland,” says Annabelle Waite of the Swiss branch of property investment agency Pure International. “Investors taking advantage of low interest rates, grandparents buying family chalets as heirlooms – and avoiding inheritance tax – young professionals starting a family wanting social and economical security. EU nationals can relocate here easily – they simply have to apply for a permit. They also have to prove they have sufficient financial means and adequate health insurance. Non-EU citizens can obtain residency permits if it is justified on a financial basis.”

For somewhere a bit less conventional you may want to consider Belize, the English-speaking Central American nation – at least according to James Hickman of Caxton FX, a specialist currency exchange company. “It is one of the best tax havens in the world, having no capital gains tax or estate tax, and under certain provisions, non-residents and offshore companies are able to repatriate their earnings tax-free.”

Most people are buying land and flats within resorts. One of the more high-end areas in Belize is Placencia, a 16-mile-long peninsula in the south of Belize, home of Francis Ford Coppola’s resort, Turtle Inn. Prices at another development, Bella Maya, a luxury beachfront four-star resort with swimming pool, restaurant, bar, shops and private beach, start at Dh1.38m, and most properties come with balcony or terrace.

By LYNNLEY BROWNING, The New York Times
Published: October 16, 2008
The Internal Revenue Service has issued new rules applying to a multibillion-dollar I.R.S. program that allows foreign banks to funnel money overseas on behalf of American clients .

New rules, issued Monday, apply to a little-noticed, multibillion-dollar I.R.S. program that allows participating foreign banks to funnel hundreds of billions of dollars overseas on behalf of American clients without disclosing their names to the I.R.S. In return, the banks promise to know who their clients are, withhold any taxes due on United States securities in their accounts — typically 30 percent — and send that money to the I.R.S.

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SANTA ANA, Calif.—An Orange County billionaire who pleaded guilty to filing a false tax return involving foreign banking accounts filed a lawsuit alleging Swiss bank UBS AG duped him into skirting U.S. tax laws.

Real estate developer Igor Olenicoff filed the lawsuit Tuesday in U.S. District Court in Santa Ana, accusing the bank of telling him his fortune would be invested in accordance with U.S. tax laws then hiding it in offshore entities.

The lawsuit carries similar accusations against financial entities in Liechtenstein, where UBS allegedly moved Olenicoff’s $200 million in investments.

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Washington, D.C. (Aug. 22, 2008)
By WebCPA staff, WebCPA.com

The Internal Revenue Service is planning to increase its enforcement efforts by sending out warning letters to a larger group of taxpayers who may be underreporting their income.

The new warning letter, the CP2057, will differ from the CP2000 letter that the IRS has been sending out for years, according to The Wall Street Journal. The earlier type of letter included suggestions for proposed changes to areas such as income, credits and deductions, while the CP2057 will mainly ask taxpayers to double-check parts of the return and file an amended return if they have made a mistake. Unlike the CP2000, it will not include the exact amount owed.

The IRS will begin testing the new automated notices later this year and expand their use if they succeed in collecting extra revenue.

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Salt Lake City (Aug. 19, 2008)
By WebCPA staff , WebCPA.com

A Utah attorney was sentenced to 120 months in prison and 36 months of supervised release after he was convicted of participating in a $20 million offshore tax fraud conspiracy.

In addition to jail time, Dennis B. Evanson of Sandy, Utah, was ordered by U.S. District Judge Tena Campbell of Salt Lake City to forfeit four pieces of real property, a Hummer and a Toyota Tundra, and to pay a money judgment of $2.77 million.

A federal jury convicted Evanson in February of conspiracy to commit mail and wire fraud, tax evasion, and assisting in the filing of false tax returns. According to prosecutors, Evanson and his co-defendants conspired between 1996 and April 2005 to conceal portions of his clients’ income from the IRS and to create false tax deductions for them. Evanson and another defendant received a fee for their services typically equal to 30 percent of the tax evaded by clients.

The scheme included offshore companies and bank accounts in the Cayman Islands and Nevis, offshore nominees and opinion letters that purported to give legal authority to the fraudulent transactions.

Four co-defendants have also pleaded guilty. Accountant Brent Metcalf of Cottonwood, Utah, pleaded guilty to conspiracy and aiding in the filing of a false tax return on Jan. 25, 2008. Attorney Graham R. Taylor of Tiburon, Calif., pleaded guilty on Jan. 24, 2008. CPAs Stephen F. Petersen of Coalville, Utah, and Reed H. Barker of Littleton, Colo., pleaded guilty to tax fraud on Jan. 18, 2008. Petersen also pled guilty to aiding in the preparation of a false tax return on behalf of a client. All four co-defendants are awaiting sentencing.

Senator Carl Levin (D-MI) revealed a list of “secrecy tricks” he said the UBS
bankers used to carry out their tax haven schemes.  They include:
• Code Names for Clients
• Pay Phones, not Business Phones
• Foreign Area Codes
• Undeclared Accounts
• Encrypted Computers
• Transfer Companies to Cover Tracks
• Foreign Shell Companies
• Fake Charitable Trusts
• Straw Man Settlors
• Captive Trustees
• Anonymous Wire Transfers
• Disguised Business Trips
• Counter-Surveillance Training
• Foreign Credit Cards
• Hold Mail
• Shred Files
Prepared by the U.S. Senate Permanent Subcommittee on Investigations, July 2008.

The U.S. Government Accountability Office (GAO) has recently published, “Cayman Islands, Business and Tax Advantages Attract U.S. Persons and Enforcement Challenges Exist.”

The 57 page pdf can be found here.