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Sunday, September 22, 2013

WSJ: Offshore Accounts: No Place to Hide?

Wall Street Journal:  Offshore Accounts: No Place to Hide?, by Laura Saunders:

What a difference a few years can make.

For decades U.S. tax authorities did little to enforce laws on offshore accounts. Some people felt free to hide assets abroad in a web of secret accounts, and many U.S. citizens living abroad didn't bother to file returns with Uncle Sam as long as they paid local taxes.

All that changed in 2009, when U.S. officials began an intense campaign against undeclared accounts after UBS admitted that it helped U.S. taxpayers hide money abroad. The Swiss bank paid $780 million and turned over more than 4,000 names to avoid criminal charges.

Now, international tax lawyers like Henry Christensen are telling clients with offshore accounts that "tax havens where people can hide money are a thing of the past." Mr. Christensen, of McDermott, Will & Emery in New York, represents many wealthy multinational families. "Forget about confidentiality," he says he and his peers are telling clients. "Transparency is here to stay."

The crackdown has brought momentous changes. Among other things, the once-impenetrable veil of Swiss bank secrecy is in tatters, following an agreement in late August between the U.S. and Switzerland that will cause dozens of Swiss banks to pay penalties and name names to atone for past misdeeds.

In the U.S., tens of thousands of taxpayers have admitted to having undeclared accounts and paid stiff penalties since 2009. More than 80 of them have been criminally prosecuted, and some have gone to prison. This past week, Ty Warner, the owner of Ty Inc., the maker of Beanie Babies, paid the highest offshore-account penalty ever disclosed: $53.6 million.

Yet the most far-reaching element of the U.S. offshore-account crackdown is still to come: a provision of the Foreign Account Tax Compliance Act, known as Fatca, which Congress passed in 2010.

Set to take effect next July, it requires foreign financial institutions to report information about their U.S. account holders to the IRS. That group includes U.S. citizens and "green card" holders living both in the U.S. and abroad. ...

Experts say it is hard to overestimate Fatca's reach or revolutionary intent. "Fatca is a dragnet meant to force transparency and curtail tax evasion around the world," Ms. Ballard says. "It affects millions of U.S. taxpayers both here and abroad." ... The law's massive changes are being felt already. Nearly 20 countries or other jurisdictions, including longtime havens such as Switzerland, the Cayman Islands and the island of Jersey, have signed or are close to signing agreements with the U.S. to ease the transfer of tax information under Fatca. Almost 30 more, including Israel and Singapore, are in talks to do so (see list on this page). China has taken tentative steps toward a Fatca agreement, and this summer Hong Kong enacted legislation that could lead to one.

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Comments

The list indicates that the Gulf states are the places to be for "advisors" in the years to come.

Posted by: GSo | Sep 23, 2013 8:27:46 AM