The New York Times has a, quite frankly, SHOCKING story about UBS’s offshore account business for Americans. That the Swiss bank offers solutions that offer little purpose other than tax evasion is not the shocking part, of course. I am blown away that not only is this tax sheltering tool used exclusively by the ultra-rich actually being attacked, but UBS is actually cooperating AND admitting guilt!
Holy cow!
Now initially, it all sounded well and good… but upon a closer reading of the article, I have a number of issues:
- “Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.” – So USB has a choice? Or are prosecutors just investigating a hundred times more accounts than they need to?
- “The Swiss are saying that this is the end of Swiss banking as they knew it,” said Jack Blum, an offshore tax specialist. “Nobody will trust the security of the Swiss bank account.”” – I hear a banker making cash register noises in the Cayman Islands right now.
- “Under the terms of a so-called deferred prosecution agreement, the bank and its executives could be indicted if UBS didn’t identify the customers.” – See issue (1). Threatening indictment still only gets you a few hundred of 19,000 accounts of interest?
- “Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.” – Over that six-year span, we would be looking at $1.8 billion in taxes evades. Kinda feels like chump change by today’s standards, but I question the accuracy of the reporting. The article indicates that UBS earns $200 million per year from the business. Assuming that revenue comes from the clients (though perhaps it comes from gains on the deposits), the clients are then looking at a net-gain of $100 million per year collectively over just paying their taxes like the average sucker. So for that six-year period, and $20 billion hidden, the clients manages a net-gain of $600 million. So are UBS’s tax-evading clients parking their money in Switzerland to come ahead 3% points on their capital? Or do Swiss accounts earn more money than plebian accounts as well?
Granted, I know nothing about Swiss banking (I’m not in their demographic) beyond what I picked up from David Cay Johnston’s ‘Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and Cheat Everybody Else’, but this sounds like a mere surface-level story. Not only does this apparently successful investigation likely only scratch at the surface of UBS’s admitted misconduct, UBS is merely one of many businesses earning money by helping wealthy individuals avoid paying taxes (the Tax Justice Network indicates that “the world’s High Net Worth Individuals (HNWIs) held around $11.5 trillion of assets offshore, which would generate a return of about $860 billion a year at a 7.5% rate of return, and a consequent tax loss of $255 billion”). Is this prosecution meant to placate those of us who have been disgusted by the ease with which the wealthy evade taxes in America? Or is this the start of real change in the way the US government treats white collar crime?
While taxpaying Americans are being expected to pay a high price for the current crisis (through diminishing employment opportunities, decades of stagnating wages, the destruction of capital wealth, and lately the withholding of income tax returns), and doing so largely against their will, a real uproar could be created should the average American taxpayer be made aware of the amount of taxes rich individuals and corporations succeed in evading. And certainly, the federal and state governments could use this income now more than any time in the recent past.
Let’s hope investigators continue to pursue the billions of taxes owed to our now-bankrupt governments on wealth generated during the good years. And if not, well, maybe we’ll address them next economic-collapse.
… and the cow goes moo
