Governments heap more pressure on offshore banks

Thu Jun 9, 2011 4:20am EDT

* HMRC scrutiny of offshore accounts intensifies

* U.S. to probe at least one bank this summer

* UK govt allocates more money to catch tax evaders

By Chris Vellacott and Kevin Drawbaugh

LONDON/WASHINGTON, June 9 (Reuters) - Tax authorities have been stepping up pressure on the offshore banking industry, with the United States promising a summer crackdown and Britain pursuing thousands of people with money in Swiss accounts.

At a conference in Washington organised by the Organisation for Economic Cooperation and Development (OECD) this week, a senior U.S. Internal Revenue Service (IRS) figure said the authority was about to probe at least one bank.

Deputy Commissioner for Services and Enforcement Steven Miller said it planned to move against "one or more banks in the next month or so".

Alongside the warning, the IRS is also encouraging voluntary disclosure whereby evaders come clean in return for lighter penalties.

"The IRS seems to be following the age-old adage that one can go further with a kind word and a stick than just a kind word by seemingly looking to strike a balance between increased enforcement actions against banks suspected of encouraging non-compliance ... and taxpayer-friendly improvements to its voluntary disclosure program," said Jay Krause, a partner at law firm Withers.

Meanwhile, a source close to British tax authority the HMRC said it was aware of approximately 500,000 offshore account holders.

Among these, it has details of 7,000 HSBC (HSBA.L) customers with Swiss accounts, holding assets of approximately 7 billion pounds, the source said.

A significant proportion of these are suspected of tax evasion and will receive letters warning they are under investigation. The source said around 500 people are being investigated and this would increase to "thousands".

British Treasury Minister David Gauke said in a statement emailed via the HMRC that the government had made 917 million pounds ($1.5 billion) available to tax authorities "to tackle tax cheats".

The HMRC's information was handed to it by another tax authority, the source said.

However, the original source of the data is a former employee at HSBC's Swiss unit, who stole details on thousands of Swiss client accounts which have since found their way into the hands of tax authorities around Europe.

The HMRC started scrutinising its share of the haul last year, sending letters to hundreds of people suspected of hiding money offshore in September. [ID:nLDE68Q1GR] A spokeswoman at HSBC said: "We don't condone or assist tax evasion."

British taxpayers who have fallen under the scrutiny of tax authorities receive a document known as Code of Practice 9 which says the HMRC suspects "irregularities" in the recipients' tax affairs and encourages them to appoint a professional adviser.

People found to have hidden assets from the British taxman offshore could face a maximum penalty of 200 percent of the tax due, according to the HMRC.

The international crackdown on offshore banking has reshaped the international banking industry as cash-strapped western governments run out of patience with tax evaders after the financial crisis.

The impact has been felt most acutely in Switzerland, home to the world's biggest concentration of offshore wealth and some of the world's biggest private banks, including Credit Suisse (CSGN.VX) and UBS UBSN.VX.

A report last month from the Boston Consulting Group said wealthy U.S. individuals had pulled most of their money from Swiss private banks since 2006 in the wake of the crackdown. [ID:nLDE74U0ZY] ($1=.6105 Pound) (Editing by Sinead Cruise and Will Waterman)

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