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from India Insight:

India can now follow the black money

Indians love many things about Switzerland: chocolates, watches, Bollywood movie locales and secret bank accounts.

Until now.

India and Switzerland on Monday signed a pact amending the existing double taxation avoidance agreement, that will make it easier for New Delhi to gain access to information on suspect bank accounts, possibly paving the way to recovering billions of dollars in undeclared wealth.

It is anyone's guess just how much money is stashed away in secure vaults in the scenic Alps.

The main opposition Bharatiya Janata Party, which made repatriating "black money" one of its election promises last year, estimates there may be some 25,000 trillion rupees, or roughly half India's GDP of $1 trillion, in secret Swiss accounts.

Other estimates are even higher.

A report from Global Financial Integrity last year said $23-$27 billion in illicit money left India every year in the period 2002-06; some of it to offshore financial centres, and the rest to tax havens and traditional banks including big Swiss banks.

from Financial Regulatory Forum:

ANALYSIS-Asia next in line of fire for U.S. tax police

By Jason Rhodes, Kevin Lim and Joe Rauch

ZURICH/SINGAPORE/CHARLOTTE, July 7 (Reuters) - After forcing Switzerland's top bank UBS  to its knees for helping U.S. residents dodge taxes, U.S. authorities are moving on other banks and countries used to hide clients' cash.

Washington inflicted a tough lesson last year on Switzerland by forcing the world's biggest offshore banking centre to lift its treasured bank secrecy and slapping a $780-million penalty on UBS.

The Department of Justice is now going after other offshore centres like Singapore, which have attracted undeclared money that left Switzerland, and has opened a criminal inquiry into Asian clients of Britain's HSBC Holdings Plc, Europe's No. 1 bank.

Banks in Singapore and Hong Kong hold estimated offshore wealth worth $700 billion against Switzerland's $2 trillion, according to the 2010 Boston Consulting Group Wealth Report.

"There are going to be more such cases," a U.S. Internal Revenue Service source told Reuters. "There's a lot of talk about money being moved from Switzerland into Asia."

Swiss lawmakers last month backed a key tax treaty enabling UBS client tax cheats' data to be handed over to the IRS, ending months of uncertainty that had threatened the recovery of the world's second-largest wealth manager.

from Financial Regulatory Forum:

ANALYSIS-Banks not out of woods after Swiss tax ruling

By Kim Dixon

WASHINGTON, Jan 29 (Reuters) - The Swiss court ruling in favor of a U.S. client who stashed funds in a UBS account sets a higher hurdle to aggressive efforts by the U.S. government to go after other banks helping wealthy tax cheats -- but the banks are not out of the woods yet.

A Swiss court ruled last week that the client's failure to file a tax form did not constitute "fraud or the like," a requirement for data to be revealed under a double taxation agreement with the United States.

The ruling puts in jeopardy Switzerland's delivery of 4,450 UBS client accounts to U.S. authorities, as agreed in August.

Caught in the crosshairs are other foreign banks the U.S. says it is informally examining for possibly helping U.S. tax cheats. A voluntary amnesty program for those with undeclared income turned up accounts at Credit Suisse, Julius Baer and HSBC, among others.

"It presents a serious roadblock to pursuing other banks," said Peter Henning, law professor at Wayne State University and a former criminal division attorney at the Justice Department.

Still, the Internal Revenue Service and Department of Justice believe they have a strong case and will want to fight the Swiss ruling. Officials have already said they are informally looking at other unnamed banks.

from Financial Regulatory Forum:

Order for UBS to release client data ruled unlawful by Swiss court

By Jason Rhodes

ZURICH, Jan 8 (Reuters) - The Swiss financial regulator broke bank secrecy law last year when it ordered UBS to hand over the files of nearly 300 clients to U.S. authorities, a Swiss court said on Friday.

Regulator FINMA decided on Feb. 18 to allow UBS to hand over some client data to U.S. tax officials, weakening the country's strict bank secrecy rules in an effort to end a damaging probe into its biggest bank, which prompted clients to pull billions of francs from accounts and leave in droves.

"Even though FINMA was in a difficult position because of the threat of charges against UBS AG, it should not have ordered unilaterally the passing on of data outside of a proper process of a request for official assistance," Switzerland's Federal Administrative Court said.

Zuercher Kantonalbank analyst Andreas Venditti said the ruling provided more clarity on FINMA's role in matters of bank secrecy, although the judgement could still be challenged.

"The damage has already been done for UBS and maybe for the whole Swiss banking industry. But if this ruling means FINMA cannot act alone in future, it certainly helps," Venditti said.

UBS shares extended earlier gains after the ruling was published, ending the session up 3.8 percent at 17.21 Swiss francs. The DJ Stoxx European banking sector index was up 1.24 percent.

from Financial Regulatory Forum:

U.S. judge rejects leniency for UBS whistleblower

By Tom Brown

MIAMI, Jan 4 (Reuters) - A U.S. judge on Monday upheld the prison sentence of a key informant in the tax fraud case against Swiss bank UBS AG and ordered him to start serving his 40-month term as scheduled this Friday.

The ruling by Fort Lauderdale Federal Judge William Zloch ignored both public and legal pleas for leniency by former UBS banker Bradley Birkenfeld, the main whistleblower in the high-profile case that cracked open Swiss banking secrecy.

Lawyers for Birkenfeld had asked Zloch last month to postpone the Jan. 8 start of his prison term, saying he was ready to cooperate further with the authorities in their pursuit of U.S. tax cheats.

The lawyers also requested reconsideration by Zloch of the jail term he gave Birkenfeld, a 44-year-old U.S. citizen who has been hailed by whistleblower advocates and U.S. prosecutors alike as a vital information source in the U.S. government's case against UBS, his former employer.

The Swiss bank was targeted in a wide federal probe of thousands of U.S. tax cheats who hid assets in secretive UBS accounts.

In a ruling filed on Monday, Zloch rejected the requests filed on Birkenfeld's behalf, saying they were denied after careful consideration of their merits.

from Financial Regulatory Forum:

EXCLUSIVE – U.S. revenue service hires “hundreds” for high-wealth tax cheat unit

By Kim Dixon

WASHINGTON, Dec 11 (Reuters) - A new U.S. Internal Revenue Service unit set up to catch rich tax cheats hiding their wealth in complex business entities is rapidly taking shape with the hiring of hundreds of employees.

The IRS high wealth unit, part of a broader effort to combat international tax evasion, is focusing on "the entire web of business entities controlled by a high wealth individual," IRS Commissioner Doug Shulman told a tax conference this week.

Another IRS official told Reuters "hundreds" of people have already been hired to staff the new unit, including some from within the agency.

"We have drawn top talent within the IRS that have expertise involving wealthy individuals as well as examination of their related entities," said Mae Lew, an IRS special counsel.

The high-wealth unit is focusing on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals.

While use of sophisticated legal structures can be legal, in other instances they "mask aggressive tax strategies," Shulman said.

from Financial Regulatory Forum:

Swiss would sign Italy tax treaty if off blacklist

ROME, Nov 5 (Reuters) - Switzerland's Economy Minister Doris Leuthard, visiting Rome on Thursday in the midst of a dispute over tax policies, said her country was willing to sign a double taxation treaty with Italy but only if it was removed from a blacklist of tax havens.

Italy's conservative government, which has launched a generous tax amnesty for funds held illicitly overseas, issued a list of 36 countries where Italians could pay a one-off fine but keep their money overseas.

Switzerland was one of the countries excluded and placed on a blacklist of countries not cooperating.

The dispute escalated last week when police and tax inspectors raided dozens of Swiss banks in Italy, and Switzerland summoned the Italian ambassador to demand an explanation.

"Switzerland wants to sign (tax) deals with our most important neighbours. We don't want to be on Italy's black list and that would be a condition," Leuthard told reporters. (Reporting by Giuseppe Fonte) ((daniel.flynn@thomsonreuters.com; +39 06 8522 4394; Reuters messaging: daniel.flynn.reuters.com@reuters.net, Rome Newsroom))

from Financial Regulatory Forum:

Bahamas signs tax accord with Britain in step toward OECD compliance

NASSAU, Oct 29 (Reuters)- The Bahamas on Thursday signed a tax information agreement with Britain, in a move it heralded as another step toward inclusion on an Organization for Economic Cooperation and Development (OECD) "white list" of countries that meet internationally agreed tax standards.

The Bahamas already had a Tax Information Exchange Agreement (TIEA) with the United States and it has been negotiating a number of similar accords with other governments to comply with the OECD standard.

The TIEA with the United Kingdom is the fourth signed by the Bahamas so far.

The Atlantic archipelago located southeast of Florida needs 12 such agreements to be removed from an OECD "gray list" of countries that are not yet in full compliance with international tax standards.

"This signing of this TIEA is another step towards the government of the Bahamas fulfilling its commitment to the evolved international standards of transparency and information exchange," said the Bahamas' Minister of State for Finance Zhivargo Laing.

"As the Bahamas and the United Kingdom adjust to the ever-changing global financial and economic landscape, we look forward to cooperation with the United Kingdom in this and other areas, and to a continued robust and amiable relationship between our two countries," Laing said.

from Financial Regulatory Forum:

Britain’s offshore havens asked to bump up taxes

By Huw Jones LONDON, Oct 29 (Reuters) - Britain's overseas financial havens should bump up taxes to wean their economies off credit crunch hit banking, insurance and funds services, a government-commissioned report said on Thursday.

Michael Foot, a former Bank of England director who helped to set up the Financial Services Authority, was asked by the British government to see how the economies of nine of the country's overseas territories and crown dependencies can be made more sustainable and resilient to shocks like the financial crisis.

"The smallest economies are particularly exposed to the downturn, but none of the nine jurisdictions I have reviewed can afford to be complacent," Foot said in his report.

Many of the offshore centres have built up financial services industry by levying low or zero taxes and reversing this policy could see business move elsewhere.

"Some now face difficult decisions and will need to look afresh at options for controlling public expenditure and increasing revenue," Foot said.

Deloitte, a consultancy which contributed to the report, said there was a compelling case for the jurisdictions to introduce value added tax on goods and services as part of efforts to broaden out revenue.

from Financial Regulatory Forum:

7,500 offshore tax evaders come clean – U.S.tax chief

WASHINGTON, Oct 14 (Reuters) - Thousands of wealthy Americans have volunteered information about unreported income hidden in overseas accounts ahead of the deadline for a U.S. government tax amnesty program, the U.S. tax commissioner said on Wednesday.

Roughly 7,500 Americans have taken part in the amnesty program, more than double the participation reported a few weeks ago, Doug Shulman, commissioner of the Internal Revenue Service, told reporters during a briefing. The amnesty program ends on Thursday.

The IRS is expanding its offshore tax crackdown and will open new criminal offices in Beijing, Sydney and Panama, Shulman said. "The IRS has new momentum in this entire area and in the coming months our efforts will only intensify," he said.

Under the amnesty program that began in September, tax cheats can declare offshore income, pay reduced fines and get general immunity from criminal prosecution. The program turned up undeclared income from offshore accounts ranging from $10,000 to more than $100 million, Shulman said.

(Reporting by Kim Dixon; Editing by Diane Craft)