The U.S. and Swiss governments have reached an out-of-court settlement in the tax evasion case involving the
Internal Revenue Service's request that
UBS AG turn over the identities of 52,000 Americans who have accounts with the bank that may have been used to avoid paying U.S. taxes.
It isn't clear at this time, however, whether the Zurich, Switzerland-based
UBS, will be forced to turn over the identities of its offshore account holders.
“The board of directors and the management of
UBS are grateful that the two governments reached this agreement to resolve this issue, and we thank the Swiss government and the Swiss delegation that negotiated this settlement for their outstanding efforts,”
UBS Chairman Kaspar Villiger said in a statement.
At the request of the U.S. and Swiss governments, the bank has agreed not to comment further pending the formal signing of the agreement, which is expected to occur in the near future,
UBS said in the statement.
Tax attorneys expect the names of some U.S. citizens with offshore bank accounts to be released as part of the settlement.
“I think there will be partial disclosure,” said tax attorney Carl Linder, a shareholder at Rothstein Rosenfeldt Adler in Ft. Lauderdale, Fla. “This is speculation, but I foresee Switzerland giving up some real big whales to the U.S. government.”
“I do think there will be disclosure made to the Treasury, but I have no idea to what extent,” said Charles Fox, Charlottesville, Va.-based partner for McGuire Woods LLP of Richmond.
Attorneys also said that the case highlights the looming Sept. 23 deadline of the IRS' voluntary disclosure program, which allows Americans who haven't reported income in offshore bank accounts to come forward and likely avoid criminal prosecution.
“I believe there will be some measure of disclosure, but we don't know what names will be on the list,” said Caroline Ciraolo, a tax attorney for Rosenberg Martin Greenberg LLP in Baltimore.
“People are worried that they are either on a list somewhere or will be on the list that will be disclosed under this agreement. They are still wondering if they can afford to come into the program,” Ms. Ciraolo said.
“My response is ‘Can you afford not to come into the program?'” she said.
Mr. Linder also said that he is urging U.S. citizens to participate in the voluntary disclosure program.
“It's a real opportunity for them to avoid criminal prosecution,” he said.
The IRS vowed this year to crack down on Americans with offshore accounts who don't participate in the program and get caught. IRS commissioner Doug Shulman said that agents have been ordered to pursue “both civil and criminal avenues” and maximum penalties for offshore tax evaders.
“We cannot allow an environment to develop where wealthy individuals can go offshore and avoid paying taxes with impunity,” Mr. Shulman told the Senate Finance Committee in March.
Account holders who come forward “are more likely to avoid criminal prosecution than those who do not,” according to an IRS statement.
Even citizens with relatively small amounts in foreign banks should disclose their holdings, Mr. Linder said.
“They shouldn't become complacent just because many accounts are bigger,” he said. “People think they're smarter than the government; I disagree.”
However, participants in the program won't be spared harsh financial penalties.
According to IRS rules, they must pay 20% of the amount of tax that was underpaid for the past six years and 20% of the highest value of the account over the past six years, in addition to all their unpaid taxes and interest due on those taxes.
What's more, accountholders who didn't file a Report of Foreign Bank and Financial Accounts statement may have to pay a penalty as high as $100,000 or 50% of the total balance of the foreign account.
In the
UBS case, the IRS is attempting to obtain the identities of 52,000 accounts that are held by American citizens. The IRS wants to investigate alleged offshore tax evasion by the
UBS clients.
The case has set off a high-stakes battle between Washington and the Swiss government, which is trying to protect the confidentiality of the accounts.
Confidentiality is considered a cornerstone of the Swiss banking system, and revealing confidential information about a Swiss bank client is a criminal offense under Swiss law.
However, on Monday, the Swiss cabinet held a meeting to discuss
UBS, which was seen as an indication that the Swiss government may have been willing to make concessions in the case.
