Nearly 15,000 Americans admit offshore tax cheating

WASHINGTON (Reuters) - Some 14,700 rich Americans, worried about a stepped-up U.S. crackdown on offshore tax cheats, have turned themselves in under the government’s amnesty program.

Michael Leupold (L) Director of the Federal Office of Justice and Hans-Joerg Muellhaupt, Project Coordinator wait before a news conference on the administrative assistance in the UBS case in Bern, November 17, 2009. REUTERS/Michael Buholzer

The Internal Revenue Service amnesty program, which ended in October, offered reduced penalties for voluntarily disclosing previously undeclared foreign holdings. It is part of a broader effort by the United States and other authorities to crack down on tax evasion.

Of the nearly 15,000 newly disclosed accounts, many involved bank accounts in Switzerland and Europe, but assets were hidden in more than 70 countries.

Participation in the IRS program was “unprecedented” and the final number was nearly double the agency’s estimate in October, U.S. Internal Revenue Service Commissioner Douglas Shulman told reporters in a telephone briefing.

Barbara Kaplan, a lawyer for high net-worth clients in New York, said: “The IRS has never got anything like that in response to prior initiatives. It’s a little higher than I anticipated based on the pace of my own practice and the panic that was out there.”

A high-profile U.S. lawsuit against Swiss banking giant UBS AG led the bank to agree earlier this year to promise to reveal the names of 4,450 client accounts held by Americans. Those accounts at one time were worth a total of $18 billion.

While IRS officials were still analyzing the amount of offshore assets declared in the amnesty program, Shulman said, “we are talking about billions of dollars coming into the U.S. Treasury” from the new disclosures.

One IRS official said that at the end of the amnesty program, there was a “significant influx in accounts with holdings in the Far East.”

The IRS has said recently it is focusing on funds flowing out of Europe and into Asia, and is opening a new office in Beijing.

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Shulman also said the outpouring of information about hidden offshore accounts had no bearing on the legal obligation of UBS to turn over names of 4,450 American account holders. There had been some speculation that success in the amnesty program might affect how much information UBS had to share.

“Some have misinterpreted this,” Shulman said.

The IRS emphasized it would closely examine the new information with an eye toward what role tax advisers played in helping their clients hide assets. Shulman declined to say if the IRS was looking at other financial institutions.

The voluntary amnesty program was open to accountholders of all banks, and lawyers have said customers from Credit Suisse Group AG and HSBC Holdings are among those that took part.


The U.S. and Swiss governments on Tuesday also released the criteria that will be used to select the 4,450 accounts that UBS must eventually provide to the IRS.

The Swiss Justice Department said it would hand over the names of wealthy American clients of UBS with accounts holding more than 1 million Swiss francs ($986,200) where there is a reasonable suspicion of tax fraud.

Accounts of a lesser size, as low as 100,000 Swiss francs, could be included in certain circumstances when there is a “scheme of lies” identified, according to the document.

“The threshold for disclosing accounts, in my opinion, is low,” said Kevin Thorn, a Washington-based tax lawyer. “Most believed the threshold would have been $1 million-plus but it appears the government is holding to its word and looking at conduct more than amounts and is going after taxpayers across the board.”

Also included in the criteria is suspicious activity related to the use of debit cards, cell phones or wire transfers to hide accounts.

Senator Carl Levin, whose congressional panel has investigated tax evasion for several years, said the language leaves too many loopholes for the Swiss.

“The tortured wording and the many limitations in this (agreement) shows the Swiss government trying to preserve as much bank secrecy as it can for the future, while pushing to conceal the names of tens of thousands of suspected U.S. tax cheats,” said Levin, a Democrat. “It is disappointing that the U.S. government went along.”

The IRS said the criteria will identify the accounts it is most interested in and those that would be hardest for the agency to identify on its own. The criteria apply to UBS accounts held between 2001 and 2008 by U.S. citizens.

Reporting by Kim Dixon; Additional reporting by Jason Rhodes in Bern, Switzerland; Writing by Julie Vorman; Editing by Maureen Bavdek, Gary Hill