In 1996, Switzerland and the United States signed a tax treaty. After the signing, however, Swiss banks continued not to cooperate with U.S. authorities who wanted information on accountholders who were connected to the United States and who may have been evading their tax obligations.
As part of ongoing efforts to prevent tax avoidance and force Swiss banks to turn over account information, a modification to the U.S.-Switzerland income tax convention was proposed, adopted and signed in September of 2009. The new tax treaty would amend Article 26 of the existing treaty in order to implement the standard in the OECD Model Tax Convention providing for the exchange of information as “foreseeably relevant” to conduct investigations into tax evasion.
The 2009 treaty has not been ratified by the U.S. Senate, in large part because of privacy concerns expressed by Senator Rand Paul. The acting Attorney General for the Department Justice (DOJ) tax division is lobbying congress to sign the treaty to give the DOJ more power in investigating and going after tax evaders.
Many Swiss banks are already violating the long tradition of privacy for Swiss bank accountholders and are turning over information to U.S. authorities. More banks are expected to provide accountholder details as part of a Swiss Bank Program.
Accountholders need to be aware their privacy is not likely to be preserved and any undeclared offshore accounts are likely to come to the attention of authorities. If you are concerned about what is going to happen if your undeclared offshore funds come to light, contact a New Jersey criminal tax lawyer today.
DOJ Seeks More Power To Compel Swiss Banks to Cooperate In Investigations
The Swiss protocol in the new tax treaty was ratified on March 5, 2015, but the U.S. senate continues to hold up the ratification of the treaty within the United States. Rand Paul is also leading a charge against certain aspects of the Foreign Account Tax Compliance Act (FATCA), also on privacy concerns.
Even as some senators try to protect the privacy of offshore accountholders, Swiss banks are increasingly cooperating with U.S. authorities voluntarily. A Swiss Bank Program allows these banks to sign a non-prosecution agreement, provided they meet conditions including the payment of fines for helping to facilitate tax evasion.
As part of the Swiss Bank Program, the banks also have to give authorities details on accountholders connected with the U.S. who may not be in full compliance with all of their duties, including filing an annual report of foreign bank accounts (an FBAR).
Three banks have already entered into these non-prosecution agreements and it is expected around 80 banks total will participate. The banks not only provide information about accountholders but also about other financial institutions that helped to facilitate tax evasion.
Once a bank is under an investigation, it cannot take part in the Swiss Bank Program to avoid criminal prosecution. This provides a strong incentive for banks to be proactive and come forward to participate in the program.
Likewise, once an individual is under investigation, he or she can no longer participate in amnesty programs like the Offshore Voluntary Disclosure Program (OVDP). If you have funds offshore you have not declared, now is the time to talk to a criminal tax lawyer in New Jersey about what steps you can take to try to protect yourself from prosecution and large fines. Call attorney Kevin Thorn before your bank turns over your private details to the IRS.
