DealZone

UBS dodges bigger bullet in tax pact

February 19, 2009

SWITZERLANDEmbattled Swiss bank UBS struck a deferred prosecution agreement with the U.S. Justice Department that will cost them $780 million. It could have been worse.

Though paying a hefty fine, the Swiss bank is paying ZERO punitive fines, despite conceding that they helped U.S. residents – estimated to number 250 — avoid paying income taxes over an eight year period.

The agreement announced on Wednesday specifies that UBS will give up $380 million of profit from eight years of cross-border business — of which $200 million will be paid to the U.S. Securities and Exchange Commission and $180 million to the Department of Justice — and $400 million for back taxes, tax penalties and restitution for unpaid taxes and interest .

But it will not pay a penalty. In addition to wining points for its cooperation, Uncle Sam evidently took pity on a bank that has already suffered billions of losses from fixed-income trades and investments during the credit crunch. Halfway down Page 3 of the agreement Reuters found this little nugget:

“In recognition of the current international financial crisis and after consultation with the Federal Reserve Bank of New York, the government will forgo additional penalties.”

Not bad considering the 43-page agreement spells out some seriously naughty behavior.

“Beginning in 2000 and continuing until 2007, UBS, through certain private bankers and managers in the United States cross-border business, participated in a scheme to defraud the United States and its agency, the IRS…”

Maybe the moral of the story is: if you have to get caught, do it during a financial slump.

UBS officials declined to comment on the absence of punitive damages.

(PHOTO: Swiss President and finance minister Hans-Rudolf Merz gestures during a news conference on UBS in Bern February 19, 2009. REUTERS/Pascal Lauener)

Comments
3 comments so far | RSS Comments RSS

So, why does the US government allow ongoing violation of OUR immigration laws? Why does it not require verification of legal status prior to hiring?

Posted by John | Report as abusive
 

Isn’t Phil Gramm [the mastermind behind 1999's (Clinton) veto-proof Gramm-Leach-Bliley Act] a vice chairman of UBS Warburg? Mr. Gramm was also the chief economic advisor to Mr. McCain during the latter’s run against Mr. Obama last November 4th.

The 1999 GLB Act removed the firewall between deposit and investment banking that had been in place since the (Senator Carter) Glass-Steagall Act of 1933, the latter being the commonsense response to the Stock Market Crash of 1929. The firewall was still in place, of course, when the market fell in 1987.

This UBS issue is all about so called “wealth management”, but is alleged to include “tax avoidance” by “hiding income and assets” from the IRS overseas.

OK Jack
oklahomajack.com

 

UBS means “you and us”…according to UBS’s latest television commercial. Somehow, UBS is trying hard to connect UBS’s message of “hope” to Senator Schumer’s videotaped remarks that the American taxpayer supposedly doesn’t care about “pork” or earmarks attached to congressional legislation.

We don’t get the connection. We don’t think that UBS Warburg gets the connection either.

We of the Middle & Working Class don’t get UBS at all, Mr. & Mrs. Reader. Our average IRA/401(k) was cut in half when the stock market tumbled from a Dow of 14,093.08 on October 12, 2007, to where the Dow Jones Industrial Average is now, i.e., hovering around 7,000.

We think that President Obama is absolutely correct. That is, in his remarks last night he said that the wealthy few are simply going to have to pay higher taxes. He has drawn the line at taxable incomes above $250,000.

Okay, that takes care of the line in the sand.

Now the question is what will the top marginal rate being increased to? It was lowered to 70% from 91% in 1964. Messrs. Reagan, Rostenkowski, Stockman, O’Neill and others of the so called Reagan Revolution lowered the top rate even further to 50% in 1981, and then to 28% in 1986.

That’s when the progressive tax system was flat out broken.

George H.W. Bush attempted a repair in 1990, raising the top rate to 31%. Bill Clinton went further in 1993, raising the top marginal rate to 39.6%. Something clicked and the deficit was gone by 2000. The U.S. Public Debt was being paid down, and the Social Security Trust Fund ceased to be raided to mask the annual federal budget deficit.

Unfortunately, George W. Bush and William Marshall Thomas reversed course and lowered the top marginal rate to 35% in 2001. Now we’ve got a $3 trillion deficit, a $5.6 trillion FY 2009 federal budget & a $13 trillion U.S. Public Debt. The U.S. Public Debt at the beginning of the Reagan administration in 1981 was $1 trillion (about $2.3 trillion after inflation today). The annual budget in 1981 was a mere $700 billion ($.7 trillion)…jumping to $3.1 trillion in FY 2001…even before adding the bailout, the stimulus & Mr. Bernanke’s toxic waste buyout program (the additional $2.5 trillion altogether).

Yet even with such a mess, the Privileged Class doesn’t want to even pay the Bush top rate of 35%…so here comes UBS for wealth management and tax avoidance. Wow!

The original ratio of bottom marginal rate to top marginal rate in 1913′s first tax rate schedule was 7:1.

That’s what America needs again. The top rate should be 1964′s 70% and the bottom marginal rate should be 10%…thus 7:1 again, i.e., the 15% and bracket should be merged with the 10% bracket and a “line in the sand” on the bottom end of the scale being $250,000 (at most $300,000).

OKJackGroup
oklahomajack.com

 

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