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UPDATE 2-Obama admin. backs tax haven bill, IRS eyes cheats

(Recasts; adds IRS lawyer, background, bylines)

WASHINGTON, March 3 (Reuters) - The Obama administration on Tuesday endorsed legislation to crack down on offshore tax havens, raising the stakes in a mounting dispute between the United States and bank-secrecy nations such as Switzerland.

The endorsement of bills unveiled on Monday in the Senate and the House of Representatives came from U.S. Treasury Secretary Timothy Geithner at a congressional hearing.

“We fully support the legislation ... on offshore tax centers, and we look forward to working with you as part of the broader effort to address international tax evasion,” Geithner told the House Ways and Means Committee.

The U.S. government last month widened its legal assault on tax dodgers with secret offshore accounts by suing Swiss banking giant UBS AG UBSN.VXUBS.N to try to obtain the names of thousands of its rich U.S. clients.

Tax havens are estimated to deprive the U.S. government of more than $100 billion a year, say advocates of the bills introduced by Michigan Senator Carl Levin and Texas Rep. Lloyd Doggett, with the backing of other Democrats.

When he was a senator last year, President Barack Obama co-sponsored similar legislation with Levin.

A thriving business in tax evasion developed in recent years on Wall Street among consulting firms, law firms, hedge funds and other elite financial players. Some purveyors even sought patent protection for their off-the-shelf schemes.

The Levin and Doggett bills would ban patenting tax avoidance plans, target dozens of offshore “secrecy jurisdictions” for more scrutiny and put a greater burden on U.S. taxpayers to show that their tax arrangements are legitimate .

TOUGHER IRS RULES?

A senior U.S. Internal Revenue Service lawyer told Reuters the IRS may team up with other governments to crack down on tax cheats as it faces pressure to toughen rules on Americans who try to conceal income in offshore tax havens.

“We are concerned about U.S. people hiding their assets and not reporting their correct worldwide income,” Steven Musher, IRS associate chief counsel for international issues, said in an interview on the sidelines of a banking conference.

At the same time, Musher said the IRS does not want changes to be burdensome for banks and financial institutions.

“We are trying to achieve the balance between increasing the reliability and quality of documentation to serve these various competing purposes,” he said.

Musher declined to discuss the agency’s lawsuit seeking to obtain the names of thousands of American clients with overseas accounts at UBS.

His remarks, as well as Geithner’s, came a day before a senior UBS executive was to testify before a Senate subcommittee hearing looking into allegations of tax evasion.

Mark Branson, chief financial officer of UBS Global Wealth Management and Swiss Bank, will appear Wednesday before the Senate Permanent Subcommittee on Investigations, chaired by Levin.

Also testifying will be IRS Commissioner Douglas Shulman and John DiCicco, acting assistant attorney general in the Justice Department’s tax division.

Doggett said at the Ways and Means Committee hearing that many other countries allow Americans to hide their wealth.

He asked the administration to "look closely at those that are coming and asking for a government bailout, like Morgan Stanley, which has 158 subsidiaries in the Caymans, Citigroup C.N with 90, and Bank of America BAC.N with 59, to explain why it's equitable for them to be able to avoid taxes at the same time they're asking for so much tax money."

The IRS’s civil lawsuit came after UBS agreed to pay $780 million and identify some clients in a deal to resolve criminal fraud charges that it helped wealthy Americans evade taxes.

FOR RELATED NEWS, PLEASE SEE:

* Foreign tax havens targeted in US bills [ID:nN02414352]

* US, Swiss officials meet amid UBS probe [ID:nN02419939]

* UBS needs 2-3 yrs for sustainable profit [ID:nL1574415]

* UBS to fight U.S. bid for client names [ID:nLO377842]

* TIMELINE-Troubles at UBS [ID:nLO25863]

* FACTBOX-Bank secrecy protection in Europe[ID: nLD684227]

Additional reporting by Lisa Lambert; Editing by Dan Grebler

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