The
U.S.-Switzerland tax treaty remains stuck in the Senate after Sen. Rand Paul
(R-Ky.) blocked an effort to propel it forward by Senate Foreign Relations
Committee Chairman Robert Menendez (D-N.J.) When
a bipartisan Senate panel lambasted Swiss bank Credit Suisse for helping rich
Americans evade billions in taxes, some watching the high-profile hearing
couldn’t help but notice that Sen. Rand Paul sticks out like a elephant in
the room.
Paul for years has single-handedly
blocked an obscure U.S.-Swiss tax treaty that lawmakers, prosecutors,
diplomats and banks say makes the difference between U.S. law enforcement
rooting out the names of a few hundred fat-cat tax evaders — and many thousands
more.
Kentucky’s tea party darling says
the treaty infringes on privacy rights. But his critics say Paul’s hold just
hamstrings the Justice Department’s tax evasion work.
“Credit Suisse is ready, at this
moment, to provide the additional information about Swiss accounts requested
by U.S. authorities but has been unable to do so because the U.S. Senate has
not yet ratified the protocol,” said Credit Suisse CEO Brady Dougan , just
after admitting his institution helped Americans evade taxes.
The Justice Department responded
at the hearing with a plea: Ratify our treaty with Switzerland.
“We ought to go after people who don’t pay
their taxes, and that tax treaty will help us go after people evading taxes,
so we ought to get it ratified,” Levin said.
The Swiss bank executives blamed
the Senate for failing to ratify the 2009 Swiss-U.S. protocol, arguing it
would allow them to pass off more names.
Paul wasn’t in the room for the
hearing, but his hold was certainly on people’s minds. International tax
experts for years have seethed over Paul’s block on the Swiss and several
other tax treaties.
These sorts of mundane tax
protocols used to get approved by unanimous consent without anyone batting an
eyelash, until Paul came to town.
Paul, a libertarian Republican
widely believed to be eying a 2016 presidential run, says his hold stems
from concerns about Fourth Amendment protections against “unreasonable search
and seizure.”
“These are people that are
alleged, not convicted of doing anything wrong,” Paul said a few weeks ago.
“I don’t think you should have everybody’s information from their bank.
There should be some process:
accusations and proof that you’ve committed a crime.”
Most lawmakers, Republicans
included, support the treaty and Majority Leader Harry Reid (D-Nev.) could override
Paul’s hold if he brought the treaty to the floor. In that vein, Democrats
share some blame for the holdup by not making it a priority.
Reasons aside, Paul’s critics say
his rationale doesn’t change the fact that his hold has hampered the Justice
Department’s efforts to hold tax cheats accountable.
“He’s concerned about protecting
tax evaders? I don’t quite understand that,” said Catherine Schultz, vice
president of tax policy for the National Foreign Trade Council, a business
group lobbying hard to get the tax treaties moving again in the Senate.
Switzerland, a well-known tax
haven that prides itself on banking secrecy, bars the disclosure of account
information unless permission is granted by government or court officials. So
Swiss banks and bankers under investigation in the United States have found themselves caught between
U.S. authorities, who want client information to settle their cases, and
breaking Swiss law.
The 1996 version of the U.S.-Swiss
treaty now in place makes exceptions to those Swiss laws, allowing requests
for such information. The Justice Department, which is investigating 13 major
Swiss banks beyond Credit Suisse for tax evasion, has tried to use the treaty
to get tax evader names in return for nonprosecution agreements.
But the standard for getting such
approval is tough under the old treaty. Law enforcement must establish that
certain taxpayers have committed “fraud,” which is more severe than simple
“tax evasion,” such as failure to file.
The new treaty lowers that
standard to include simple tax evasion and would “enhance our ability to get
information in those ways,” Kathryn Keneally, assistant attorney general for
the tax division, said at the hearing.
Justice received only 238 of the
22,000 Credit Suisse names because the old treaty is the one in effect, say
Swiss lawyers, who dispute the total assets hidden there. The rest “would be
covered by the new treaty,” Romeo Cerutti, Credit Suisse’s general counsel,
told lawmakers.
In January, a Swiss court shot
down an IRS request for the names of Americans hiding money in Julius Baer,
another Swiss bank under DOJ investigation, saying the request didn’t meet
the old treaty’s standard.
The lower standard that tax
enforcement wants in the new treaty is exactly what makes Paul nervous. The
treaty allows Switzerland to pass account information that may be “relevant”
to an investigation, which a senior Paul aide said sounds “a little scary and
opposed to Fourth Amendment mentality.”
Credit Suisse just days ago sent
representatives to Paul’s office to try to change his mind.
Paul’s office acknowledges that
they’re in a “difficult situation” politically on the topic, but they say
their constitutional priorities “take precedent” over Swiss bankers’
concerns.
“If people are breaking the law,
they should be punished, but we can’t capitulate on Americans’ privacy rights
in order to handle this one issue at this one moment in time,” the senior
aide said.
Paul’s office points out that the
treaties aren’t the only way to get tax cheats’ names. Justice also has the
option of using “John Doe summons” and court subpoenas. Those methods were
used to get the names of 4,500 American UBS clients in that bank’s tax
evasion settlement in 2009.
Paul’s protest is also linked to
his abhorrence of the soon-to-take-effect Foreign Account Tax Compliance Act,
which will force foreign banks to disclose U.S. account information to the
IRS, and domestic banks to reciprocate to other nations’ revenue departments.
A Treasury official recently told
Paul’s staff that FATCA “doesn’t work” without the treaties, though there
seems to be disagreement on that point, even in the executive branch.
That sent up red flags anew to
Paul because the senator has legislation to repeal FATCA and hesitates to
support a treaty that enables a law he views as U.S. government overreach.
His office has met with businesses
that have a stake in those tax treaties, which also include pacts with Chile,
Hungary and Luxembourg and are asking him to release his holds.
Beyond tax evasion, companies say
the treaties are needed to settle double-taxation disputes that take years to
resolve, leaving businesses’ financial books in limbo when it comes to what
they owe.
That’s why Paul’s office said the
senator is contemplating releasing these holds, but he wants a number of
questions answered first. Last summer, his office reached out to the Joint
Committee on Taxation and Democrats on the Senate Foreign Relations Committee
staff to learn about ways to amend the treaty to his liking. He may offer up
report language to narrow the treaty interpretation in the next few weeks.
“Sen. Paul would like nothing more
than these treaties to pass,” his staffer said and contrary to some reports,
the senator isn’t demanding FATCA repeal in order to advance the treaties, he
added.
US taxpayers who have undeclared accounts in Credit Suisse or other Swiss banks, may now want to consider
applying for the US Offshore Voluntary Disclosure Program (OVDP), which sets a
limit to the penalties imposed on them by the Internal Revenue Service (IRS)
for failing to declare foreign assets and earnings.
Once either:
- The Swiss Banks disclose an account holder's
name to the IRS under the non prosecution agreement or
- Mr. Andreas Bachmann or Josef Dorig or Markus
Walder or Susanne
Ruegg-Meier or Roger Schaerer discloses an account holder's
name to the IRS or
- Any 1 of the other 11 Credit Suisse Bankers, who were indicted in 2011 along with Mr. Dorig, discloses an account holder's
name to the IRS
the OVDP election is no longer available to that account
holder!!!
Taxpayers Who Wish To Take Advantage
Of The OVDP Must Act Quickly!
Have Un-Reported Income From a Swiss
Bank?
Value Your Freedom?
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax
Consultation Contact US at
or Toll Free at 888-8TaxAid (888
882-9243).
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