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Swiss banking secrecy in the news again as germany seeks data

by Linda Beale

Swiss banking secrecy in the news again as Germany seeks data

The Swiss are fighting hard to maintain their edge in providing tax evasion services for the euro zone and the US. In spite of the modest changes to the US-Swiss tax convention, we can expect difficulty in acquiring information from Swiss banks that should be turned over routinely. Germany is experiencing the same problems. But, as many will have read, a whistleblower offered Germany more data on Swiss bank accounts, for a price. And Germany bought it last month for $3.5 million, gleaning the names of 1500 account holders and other information (information that may also be shared with other countries such as the US and provide additional ways to hone in on US tax evaders with secret accounts).

Now starts the internecine wrangling between the two EU countries. Before the deal was finalized, the Swiss authorities and a German Taxpayers Association complained that the German deal would reward a criminal who had engaged in industrial espionage. See Bild.com, Is It Right to Do Business with Criminals? Feb. 2, 2010.

And now that the deal is done, the Swiss are considering how to get even. See Dempsey, Battle over Tax Data Heats Up between Switzerland and Germany, NY Times Feb 15 2010. At least one Swiss lawmaker has proposed a law that would have Switzerland releasing the names of all German politicians who have secret bank accounts in Swiss banks. Hmmm. That might be a very good idea. The trifle of a breach to the wall of Swiss banking secrecy would be a good start towards a law that does away with it altogether. Having German politicians exposed for speaking out of both sides of their mouths–those who have secret Swiss accounts but are publicly making a big show about Germans who are using the accounts to escape German taxation–might provide enough Schadenfreude to help shame the system back into greater compliance. And once people realize that Swizterland is still intent on maintaining its tax evasion services no matter what it has agreed to in its newer tax treaties, maybe countries will get even tougher on the country and insist on real tax information sharing.

But note the result mentioned for one of the German account holders identified in the earlier LIchtenstein bank information. A court awarded the holder millions of euros, on a finding that the bank should have warned him about the release of his information so that he could have voluntarily come forward to the German authorities. The account holder obviously knew that he had created a secret account and that he was evading German tax lawyers. The bank, of course, must have known that it was facilitating such evasion. The court apparently assumes that the bank owed its co-conspirator notice that its role in the conspiracy had been compromised. That’s a pretty strong dose of due process protection, when an aider of your tax evasion is required to inform you when it can no longer perform as expected, so that you can call short your tax evasion with the least possible damage to yourself! Ends up rewarding the tax evader with the damages. I must admit that seems to challenge common sense. Tax evasion is one “venture” where the co-venturers should all be at risk if one of them falters…..

Switzerland has facilitated tax evasion for decades. It’s time to end this farce and force the Swiss to close down their tax sheltering business.

[editorial comment: sorry for being offline most of the last week, folks; I’ve been ill but now am much better so hopefully can return to regular postings.]
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crossposted with ataxingmatter

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Swiss banks, hedge funds? assist with tax evasion

by Linda Beale

Two “R”s in the news: Rachel Alexandra and Rudolf Elmer–Swiss banks, hedge funds? assist with tax evasion
Maybe the world is looking up. A filly has won the Eclipse Award for Horse of the Year, by a whopping 130 votes to second runner Zenyatta’s 90 votes. I’ve always had a soft spot in my heart for horses, and especially for fillies. Comes from growing up visiting my country cousins in Tennessee, where my favorite part of the visit was getting to ride old Dan or some other horse.

And Rudolf Elmer is doing his bit, too, to add some cheer to the day. He’s the banker who worked for Swiss bank Julius Baer until he was fired in 2002 and has spent time sense sharing with the world the nefarious deeds of some of the Swiss institutions who have helped clients evade billions in taxes through uses of offshore havens. Says Rudolf “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.” Swiss Banker Blows Whistle on Tax Evasion, New York Times, Jan 19, 2010

Elmer is flying to Germany where he is planning to blow the whistle even louder on Swiss banking assistance for tax evasion. The German authorities are “putting him up in a five-star hotel” but you can bet the U.S. authorities are eagerly probing his show and tell–apparently documents covering more than 1300 individuals and 100 trusts over five years that “detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer.” Elmer’s no saint, obviously, but the IRS strategy is described as “it takes a rogue to catch a thief” (echoes of television’s crime dramas).

The hiding places for all those wealthy tax scoflaws who thought they could just slip their millions into the shadows may not be much good these days. Further, the possible complicity of hedge and private equity firms in assisting tax evasion should, if verified, be the final nail in the coffin of the privileged “carried interest” taxation of hedge and equity fund managers’ compensation.

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1204 and forever…more unitary executive?

Rdan

Hat tip Naked Capitalism regarding the Financial Stabilility Improvement Act as described by Washington’s Blog concerning banks/investment companies ‘too big to fail’ actions by the US and EU countries.
October 29, 2009 begins testimony on more emergency powers by the executive branch.

The House Committee on Financial Services will hold a hearing on the bill tomorrow, with Tim Geithner, Sheila Bair, John C. Dugan (Comptroller of the Currency), Daniel K. Tarullo (Governor, Board of Governors of the Federal Reserve System), John E. Bowman (Acting Director, Office of Thrift Supervision), Richard Trumka (President, AFLCIO), and others as witnesses.

Since unitary executive power has been the trend in the last few decades, each party sort of picking its turf to expand regardless of actual programs, this is a worry. It is timely to review how the F-22 stayed alive and well regardless of inefficiencies, and the opportunities costs of this way of doing business. Decades of costs.

Are we ever going to try and deal with the main street economy, or is that for historians? Where is the vision for more than the welfare of financials, or multinational companies?

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A Year and Counting: re-regulation of Wall Street

by Linda Beale

A Year and Counting: re-regulation of Wall Street

On Monday night, I participated in a symposium on the Financial Crisis: One Year Later, sponsored by the Center for the Study of Citizenship and others. With me were Larry Ingrassia, Business Editor of the New York Times, and Chip Dickson, CFO of W2Freedom, a private equity fund that purchases community banks. We talked about the causes and potential solutions to the financial crisis and the Great Recession that it had spawned. Much of our focus was on the way financial institutions had grown “too big to fail”, creating a “casino mentality” that assumed that the government would come to the rescue if needed, thus socializing losses while privatizing gains.

As Amity, a commenter on Salon’s post by Andrew Leonard on Wall Street’s risk-taking, noted:

The whole point of society is to moderate and channel wild animal impulses into productive forms. In keeping with that purpose, we as a civilization once saw fit to impose on high finance a series of regulatory restrictions and frameworks for oversight so as to moderate and channel the risk-taking behaviors of financiers.

Then we as a civilization saw fit to remove those restrictions and oversight. The result was as foregone, and as predictable, as if we were stalling an aircraft and letting gravity take over.

I kicked off the discussion session of the symposium with the following question:

It’s been a year now since we were hit with a financial system tsunami, and recognized that we had let banks get “too big to fail” and speculation in derivatives explode. Yet here we are, one year later—we’ve actually encouraged banks to grow larger; we have not yet enacted any regulation of derivatives; we have not yet enacted any tighter regulation of hedge funds and private equity funds or the “shadow banking” system generally, we have not yet formed a consumer financial protection agency—in fact, we’ve done essentially nothing to change the conditions that apply. What does this mean, in terms of the stability of the financial system?

I’m not sure that there is a satisfactory answer to that question. Because it suggests that our political processes are now so beholden to the corrupting influence of the financial behemoths that we will not be able to find the will to rein them in. See, e.g., Robert Reich, so much happening in D.C., so little to show for it, Salon.com (Oct. 9, 2009) (lamenting the fact that “Congress is overwhelmed with corporate and Wall Street lobbyists”).
(cross posted from ataxingmatter 10/09/2009)

Update: Barney Frank and the SEC on derivatives, Naked Capitalism

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