Keep the pressure up on tax evaders

August 14, 2009

When I first read the New York Times article saying U.S. authorities are building criminal cases against 150 wealthy UBS clients, I had to do a double-take.

Just 150?

That couldn’t be right. After Bradley Birkenfeld turned over his Rolodex to U.S. authorities last year, tens of thousands of clients looked to be in the cross-hairs of a U.S. government itching to crack down on tax evaders protected by the world-renowned Swiss secrecy laws.

The timing of the leak to the New York Times, however, suggests the government is keen to keep the heat on other potential lawbreakers, whether they have accounts with UBS or other offshore banks.

And they should. In a world of spiraling federal deficits and a deepening perception that the rich are held to different standards, the government needs to come out swinging to show it’s serious about cracking down on tax evasion.

Limited resources and difficulties in proving wrongdoing have led many wealthy Americans in the past to play a numbers game: sit tight and hope the tax man doesn’t come knocking on your door.

Keeping the prosecutions front and center, however, may make for sleepless nights for some people, especially when the amounts involved make jail time more likely.

On Friday, Reuters reported that a Malibu, California man, John McCarthy, faces up to five years in prison, three years’ supervised release and up to $250,000 in fines for what the government estimates was a tax loss of $200,000 to $400,000.

Hopefully, the 150 will be just the beginning of a long list of prosecutions, but, more importantly, the catalyst to push some fence sitters into voluntarily fessing up.

It can be attractive: no criminal prosecution, lower penalties, and for those who could be ruined by indictment, confidentiality. (Not everyone will qualify for this amnesty, however).

Though the details of this week’s agreement between the Swiss government and the Justice Department haven’t been disclosed, estimates are that from 3,000 to perhaps more than 10,000 names of UBS account holders could be handed over to U.S. authorities as a result.

That’s many fewer than the 52,000 initially requested, leaving many to guess: will I or won’t I be on the list?

Now’s the time to make tax evaders squirm, so that maybe, just maybe, they’ll opt to pay up.


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