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From Switzerland With No Love
September 2, 2009 8:38 AM   Subscribe

Swiss private bank Wegelin says goodbye and good riddance to America. Swiss private bank Wegelin announced two weeks ago that it is to stop doing business in the United States. The St Gallen-based bank, Switzerland's oldest, said the decision had been taken in response to stricter measures introduced in the US against tax dodgers and planned changes to estate tax, which would make some non-US citizens liable to tax if they inherited US securities. In a letter to investors it said Swiss banks were likely to find themselves in an untenable position, as they would be expected to know which clients were liable to pay US tax – "an impossible undertaking", given the lack of clear definitions in the matter.
posted by DreamerFi (88 comments total) 4 users marked this as a favorite

 
note: the first link and "a letter to" both point to (the same) pdf file.
posted by DreamerFi at 8:40 AM on September 2, 2009


In Neil Strauss' (I know, I know) Emergency, he stumbles across information about just how much overseas banks are expected to comply with various United States regulations. Many banks seemed to be getting quite sick of it.

I guess this would be a nice, obvious example of such.
posted by adipocere at 8:48 AM on September 2, 2009 [1 favorite]


I don't think the outrage is justified. This is a simple Homeland Security issue.

If you're inheriting US stock certificates from your great-grandfather, you are clearly a terrorist.
posted by rokusan at 8:53 AM on September 2, 2009


any link to a PDF file needs a [PDF link] marker.

this is pretty funny though. can you imagine how many tax dodgers are researching these guys right now? I bet their next annual report will feature a nice uptick in business...

also: brass balls.
posted by krautland at 8:55 AM on September 2, 2009


he stumbles across information about just how much overseas banks are expected to comply with various United States regulations. Many banks seemed to be getting quite sick of it.

don't even get me started on how many european companies are required to comply with SOX. what a fucking nightmare that is.
posted by krautland at 8:56 AM on September 2, 2009


A "fortress America" seems the natural outcome of several forces that really kicked into high gear during the Bush II era. The combination of security concerns, "security" concerns, disregard for privacy, anti-immigration moves, protectionist trade moves, and general nose-thumbing at any international community in any area has to have some blowback eventually, doesn't it?

The very high benefit in dealing with the giant US economy has always led international firms bite the bullet, but if the mighty US economy continues to decline and decline, it becomes less important overall, and will make it not worth dealing with big issues like this article's banking example... as well as small issues like "Are you serious? I have to relabel this with imperial measurements? What is this, 1762?"

The idea of two economies, one for the world and one for the USA, is a possible outcome I suppose, though a pretty extreme one. I'm sure a lot of internet commenters on less commie-liberal websites than this one would be "just fine!" with that, too... which would accelerate the rift if anyone listened.

Romantically, the idea of an entire world routing its economy around the USA in order to deal with everyone else (the way Cuba does now, for example)... that's an amusing idea, if only for science fiction writers.
posted by rokusan at 9:00 AM on September 2, 2009 [4 favorites]


Wait, are we for tax-havens now?
posted by kmz at 9:02 AM on September 2, 2009 [16 favorites]


as they would be expected to know which clients were liable to pay US tax – "an impossible undertaking", given the lack of clear definitions in the matter.

Well, I think the fix for that is pretty obvious.

All clients are liable to pay US tax.

There.
posted by ArgentCorvid at 9:04 AM on September 2, 2009


Wait, am I supposed to be outraged at the bank or the U.S. government? Are Swiss banks not notorious havens for all sorts of shady money dealings, whose business models are largely predicated on the principle of "give us your money, we don't ask any questions"?

Can someone with a deeper knowledge of international banking explain to me how this isn't just a bunch of sour grapes?

You know who else put their money in Swiss bank accounts, don't you?
posted by mkultra at 9:05 AM on September 2, 2009 [7 favorites]


I was going to make an FPP about this story, but thought it was schadenfreudefilter - this seems like a suitable place for it:

Facing bankruptcy and refused a bailout, noted tax haven the Cayman Islands is pondering introducing taxes. Jersey and Guernsey are both facing similar crises. Tralalala.
posted by WPW at 9:06 AM on September 2, 2009 [2 favorites]


*every* swiss bank is cutting ties with US customers. The funny thing, even swiss nationals which reside in the US have they accounts closed.

Basically the newly signed agreement between US and Switzerland makes handling US customers a huge mess. Which means for the bank going a lot of troubles and then getting shafted by the IRS when something has not been done properly.

Retribution for the UBS tax-cheating scheme run in the US ... just makes the rules so hard that "is not worth it" anymore.

And is not only the US - France is next, Germany is "looking" - just the last chapters in the demolishing of the once-so-famed Swiss Bank Secrecy.

Back to milking cows now...
posted by elcapitano at 9:06 AM on September 2, 2009 [1 favorite]


Swiss private bank Wegelin announced two weeks ago that it is to stop doing business in the United States.

What does this even mean? A Swiss private bank would generally not do business in the US anyways. It would do business in Zurich, and the US customers would come to it.
posted by smackfu at 9:09 AM on September 2, 2009


kmz: Wait, are we for tax-havens now?

I think we are just sick and tired of the USA demanding that the world play by its rule or else it will take its ball and go home.
posted by paisley henosis at 9:09 AM on September 2, 2009 [1 favorite]


I don't care about Swiss banks closing, but let me know if they stop sending us clocks, cheese or misses.
posted by DU at 9:10 AM on September 2, 2009 [3 favorites]


Wow - if you read through the first link, they essentially say that tax evasion and tax fraud have a moral high ground over American 'tax authorities' in regards to the "morality of their resource allocation." Basically, a laundry list of all the things wrong with America, like wars, prisons, the way we treat the "underclass" etc etc ad infinitum. So its ok to evade taxes, because if you think your country sucks, then you shouldn't support it.

But then they go on to imply that the US is going to fail, yadda yadda.. European stocks are undervalued, US stocks are overvalued... it just goes on and on. The letter is one long insult to the US.

The thing about Swiss banks - they live and die by their secrecy. Wegelin and Co probably did a general inventory of the money that they hold and found that most of it was deposits from Saudi princes, African warlords, Russian oligarchs, etc etc, all of whom would take their money elsewhere at the first sign of transparency. It is worth it for them to just drop the American tax evaders purely as a marketing ploy.

Its sad, really. Sometimes I dream about the day that the veil is lifted from the Swiss banking industry, all the things that would be exposed to the light of day, all the rats scurrying about, all the ill-gotten gains revealed in all their injustice. This is unlikely of course, but at least I can dream.
posted by infinitefloatingbrains at 9:13 AM on September 2, 2009 [22 favorites]


Yeah, new tools and techniques mean that money laundering (which is, basically, what the famed Swiss Bank Accounts are for) is intensely difficult for banks to do without being caught. I really don't think there's any loss, unless you're a criminal or a tax dodger.
posted by Slap*Happy at 9:14 AM on September 2, 2009 [4 favorites]


I think we are just sick and tired of the USA demanding that the world play by its rule or else it will take its ball and go home.

Although, the ultimate goal of the USA is to get these tax dodgers to stop using private banks that protect them, so this kind of decision by the Swiss bank is just fine by them.
posted by smackfu at 9:14 AM on September 2, 2009 [1 favorite]


So its ok to evade taxes, because if you think your country sucks, then you shouldn't support it.

Don't forget the audience for this note is their current clients, who want to be told they are morally correct.
posted by smackfu at 9:15 AM on September 2, 2009


What does this even mean? A Swiss private bank would generally not do business in the US anyways

Well what happened is that (among others) famed Swiss Bank UBS sent out employees from Switzerland to the US to "recruit" customers - example: the UBS Art Expo in Miami. Promising the usual benefits (in short: IRS will not get their cut). Google for "birkenfeld ubs".

Until they got busted - and the IRS decided it had enough - the result is the practical end of bank secrecy. Which in itself is a good thing - do you want to pay taxes while the millionaire bring their money to Zurich ? Only problem - for the swiss - is that this bank secrecy tax heaven thing was extremely lucrative. And this is the reason they will be back to milk cows soon.

Unless all of you start buying Rolex for example.
posted by elcapitano at 9:17 AM on September 2, 2009


Banks should only be allowed to provide accounts and lend money to citizens of their own countries.
posted by No Robots at 9:19 AM on September 2, 2009


money laundering (which is, basically, what the famed Swiss Bank Accounts are

Tax evasion. Money laundering we got rid 20 years ago. How many warlords / drug dealers are around compared to for example US cosmetic surgeons, German dentists, Lawyers from France ....
posted by elcapitano at 9:20 AM on September 2, 2009


It is more productive, particularly in matters of taxation, to leave morality aside, and to take a non-judgmental view of tax liability, the meeting of obligations, and, if need be, the various forms of evasion, as givens resulting from the prevailing legislation and its enforceability.

Wait, is this saying what I think it's saying: "If you can get away with it, it's OK by us."
posted by Sova at 9:26 AM on September 2, 2009


elcapitano: And this is the reason they will be back to milk cows soon.

They have some very nice dairy goats as well.
posted by paisley henosis at 9:30 AM on September 2, 2009


This letter must be getting passed around the IRS email tree with some mirth today. Cloaked in a lot of whining and accusation, the message is basically "the IRS is getting exactly what it wants from us." Good. Tax evasion for citizens of all other countries might be a core Swiss value, but it isn't an American value. I recognize their right to espouse any values they please, and it seems that now they recognize ours as well. It's a good day.
posted by rusty at 9:31 AM on September 2, 2009 [2 favorites]


Sova: Exactly. And why shouldn't it be, for them? Switzerland loses nothing in government income, and gains banking business. They must have loved the absurd American tax code for all these years.
posted by rusty at 9:32 AM on September 2, 2009


Sometimes I dream about the day that the veil is lifted from the Swiss banking industry, all the things that would be exposed to the light of day, all the rats scurrying about, all the ill-gotten gains revealed in all their injustice.

Yeah, sometimes I think that the Helvetian War from Brin's Earth isn't so completely goofy after all.
posted by ROU_Xenophobe at 9:34 AM on September 2, 2009 [3 favorites]


I don’t know what they have to say,
It makes no difference anyway --
Whatever it is, I’m against it!
No matter what it is or who commenced it,
I’m against it.

Your proposition may be good
But let’s have one thing understood --
Whatever it is, I’m against it!
And even when you’ve changed it or condensed it,
I’m against it.





posted by nola at 9:42 AM on September 2, 2009


The bank's logic is breathtakingly damaged: Tax evasion is okay in Switzerland because the US invaded Iraq. Someone should give the chairman a Metafilter account.
posted by Blazecock Pileon at 9:42 AM on September 2, 2009 [6 favorites]


No Robots: Banks should only be allowed to provide accounts and lend money to citizens of their own countries.

Let me guess, you live in the middle of a large country. I have been living, working and been paid in two different countries alternatively for the last 5 years, having a bank account in only one country would be ridiculous as I would lose so much money on comission charges, not counting the annoyance of card limits for payments abroad.
In this day and age, I am pretty sure I am not the only one around to have to juggle with different countries and monies, and taxes.

If a Swiss bank wants to stop doing business with anyone, or any country's citizens, good for them that they still have the lawful RIGHT to do it.
posted by tweemy at 9:45 AM on September 2, 2009 [1 favorite]


Ah so they're going back to their core business, hiding the money of European royalty! The Swiss have always shown that their secrecy was bendable and would be sacrificed if need be. It gave up the terms of Wittgenstein's trust to the Nazis:
And this is where the story gets extremely interesting, because they had a huge pile of gold sitting in a Swiss bank vault, which belonged to all the siblings. That capital could only be released if all siblings signed it off. Nazis, as we know, loved more than anything in the world, gold, and when they got whiff of this gold, they said, 'Right, we want it.' Paul was outside of Austria and said, 'I don't see why I should sign this gold off'. The two girls remaining said, 'We could be in trouble if you don't.'

The Nazis then came up with an extraordinary scheme saying 'If you give us the gold, we will classify you as 'mischling,' that is to say, half-breed. If you don't give us the gold these two sisters will be classified as full Jews.'
Even assuming that the knowledge of the account (something like 1.7 tonnes of gold!) were known to the Nazis through Gretl it is unclear how the amount and details of the trust were made known and it is fairly clear that Nazis had no trouble accounting for the foreign assets through Swiss sources. Swiss secrecy seems to end when it becomes trouble for the Swiss and the banks. For years they ran a great scheme with UBS that kept money away from soon-to-be divorced wives and collecting a huge 30% tax on top of it. Now they'll have to go back to their old scheme of holding the fortunes of European royalty.
posted by geoff. at 9:48 AM on September 2, 2009 [7 favorites]


“Switzerland has become a paradise for foreign capital on which tax is not paid. The uproar from foreign governments is understandable.” These are not the words of a critic of the banks, but of private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”.

Konrad Hummler - Managing Partner, Wegelin & Co.
posted by orme at 9:49 AM on September 2, 2009 [1 favorite]


Actually Switzerland's bank secrecy began after a number of Germans were executed for the crime of having foreign bank accounts.
posted by atrazine at 9:51 AM on September 2, 2009


The bank's logic

which turns to be the logic of his employees, the company selling services to the banks, the state (cashing big taxes from the banks) ...

pecunia non olet - nothing new since 2000 years ago.
posted by elcapitano at 9:51 AM on September 2, 2009


I'd be more impressed with their "Oh noes, Iraq!" logic if Swiss banks hadn't stolen the assets of Jews fleeing Nazi Germany.
posted by aramaic at 9:53 AM on September 2, 2009 [3 favorites]


Sova: Exactly. And why shouldn't it be, for them? Switzerland loses nothing in government income, and gains banking business. They must have loved the absurd American tax code for all these years.

I suppose you're right. I'm just shocked at the openness with which they state it. Particularly the use of the phrase "legislation and its enforceability". That's not just avoidance, but out and out evasion. I can understand the moral case that nobody should be expected to increase or maximize their tax liability, but this is excusing breaking the law.
posted by Sova at 10:05 AM on September 2, 2009


Banks should only be allowed to provide accounts and lend money to citizens of their own countries.

What if you're working in another country on a work visa? What are you supposed to do with your checks?
posted by krinklyfig at 10:28 AM on September 2, 2009


Hey, I didn't say that there shouldn't be international e-banking. Most people can currently use their accounts for deposits and withdrawals anywhere in the world.
posted by No Robots at 10:37 AM on September 2, 2009


Well, morality and law don't always go hand in hand.
posted by kathrineg at 10:40 AM on September 2, 2009


You know who else put their money in Swiss bank accounts, don't you?

The Jews? Wait.. no, I'm doing it wrong.
posted by odinsdream at 10:56 AM on September 2, 2009 [2 favorites]


Two points to keep in mind when considering this...

First, regarding the "morality" of US tax evasion, consider that the US (almost?) uniquely applies their tax rate to all your income, anywhere in the world. UK citizens working in Canada pay tax to Canada. French citizens working in Germany pay taxes to Germany. US citizens working in Ireland pay taxes to... Ireland and the US. You'll notice that citizens of other countries rarely renounce their citizenship when they move abroad; For Americans, you realistically have no choice unless the idea of "income" means nothing to you.

Second, regarding hiding money from various legal settlements (geoff mentioned divorce, for example) - You can still do that just fine with plain ol' cash, just a lot more awkward to haul around in any sizeable quantity.
posted by pla at 11:12 AM on September 2, 2009 [1 favorite]


pla: With the great majority of countries, the US has treaties that allow americans working abroad to set local income tax payments against what they would owe in the US. In practice it works like state income -- if you work in one state and live in another, your state of residence generally subtracts state tax you paid in your working state from what you would owe in your state of residence. If your residence state taxes are higher, you only pay the difference. You're not taxed twice on the same income though. Americans working abroad have to file US tax forms, but in practice rarely pay any US tax, because our tax rates are generally lower than anywhere else.

It is, of course, wildly more complicated than this, because our tax code is such a massive clusterfuck. But it's much less accurate to claim Americans are always on the hook twice for foreign income.
posted by rusty at 11:33 AM on September 2, 2009 [1 favorite]


First, regarding the "morality" of US tax evasion, consider that the US (almost?) uniquely applies their tax rate to all your income, anywhere in the world.

So it's immoral for the US to have different laws than other countries that aren't "fair"?
posted by smackfu at 11:36 AM on September 2, 2009


For us Americans who choose to live and work abroad, this is a serious problem.

I'm in London but have heard stories from several colleagues of British banks that already won't take on new US clients, and some banks are reportedly discussing an outright ban on US clients.

I'm with HSBC Private Banking myself, wanted to move to Barclays about two years ago and even back then they wouldn't take my custom due to the paperwork imposed by American regulators.

Nice. Just what am I supposed to do with my money? Oh I get it - some domestic, US based bank will provide services for me. More than likely not all the services I need (yeh, from the consumer point of view American banks are woefully behind the times in many product areas, one surefire way to keep costs high and maximise profits), but I'm sure they'll offer a fair share for what no doubt will be an unfair price.

You know I'd probably just go along with the idea that big US domestic banks were pushing this agenda, if those rumours about US citizens requiring exit visas - and permission from Homeland Security to domicle abroad - weren't so damn persistent. Sure, the rumours started under Bush but I note they haven't really gone away since he left office.

A few years ago they significantly tightened up the tax rules applying to Americans ex-pats, significantly increasing our tax load (unlike other countries Americans residing out the the United States still are obliged to pay domestic taxes).

You know its almost as though the United States doesn't want its citizens living and working overseas anymore. They surely are making it tough.

"Most people can currently use their accounts for deposits and withdrawals anywhere in the world."

Not really. My bank charges me £20 to deposit a cheque drawn on a US bank. Needless to say I've got a fair number of cheques that I never ended up depositing, as it wasn't worth it.
posted by Mutant at 11:55 AM on September 2, 2009 [1 favorite]


Tax evasion for citizens of all other countries might be a core Swiss value, but it isn't an American value.

Riiiight.

I guess that's where the term "Delaware corporation" comes from, right? Or is "tax evasion as a core value" only a bad thing at an international level, not a state one?
posted by rodgerd at 12:03 PM on September 2, 2009


smackfu: So it's immoral for the US to have different laws than other countries that aren't "fair"?

No, I (as a US taxpayer living in the US) consider it immoral that people with no connection to the US (beyond the accident of birth) feel compelled to pay a significant portion of their income to a government doing absolutely nothing for them. In any context outside "international affairs" we'd call this a protection racket, plain and simple.

As a US resident, I may object to some of the specifics of where my money goes (*cough* faith based initiatives *cough*), but have to admit I enjoy things like roads and schools and even police protection (a whole different topic, but at least in theory police serve the public good). In the absence of those benefits, why would anyone pay to support Uncle Sam?
posted by pla at 12:25 PM on September 2, 2009 [2 favorites]


My bank charges me £20 to deposit a cheque drawn on a US bank.

It works both ways. There is some weird middle man that handles international transfers that gets £20 for handing the bits from here to there. I don't think it is your bank directly.

Makes paying student loans a £240 pain the ass unless you use a work around like giving your folks signed blank cheques that they can fill in and deposit into your account each month.

I'd like to find a business model where I can be in the way of a perfectly reasonable transaction and scoop up £20 a pop!
posted by srboisvert at 12:31 PM on September 2, 2009


There is some weird middle man that handles international transfers that gets £20 for handing the bits from here to there.

Probably SWIFT. And it doesn't seem so weird to me that there is a middleman. Otherwise every bank would have to deal with every other bank individually.
posted by smackfu at 12:40 PM on September 2, 2009


US citizens living abroad do get benefits from the US, like consular assistance and, occasionally, the Marines coming in to get them if needed. I'm not arguing the merits of the details of current US tax regulations for citizens living abroad, just saying that a US passport is a lot more than an accident of birth.

/US citizen, lived abroad as a teenager when my father was transferred to the UK for a job, remember some bitching about tax issues even then.
posted by immlass at 12:42 PM on September 2, 2009


NUKE THE SWISS
posted by vectr at 12:49 PM on September 2, 2009


Nuke the Swiss? The country where a bomb shelter for everybody is mandatory? This isn't your lone nut bomb shelter, we're talking about bank vault doors and separate filtered air systems. Oh and if you don't have one at home there are community bomb shelters under the soccer fields, you know if you're walking around and hear the raid siren. And, if need be, they plan on detonating all tunnels leading into Switzerland. In the event of a nuclear holocaust we'll have a few Aryan Nation types emerging from their Montana bunkers and the whole country of Switzerland, the rest of us are doomed.
posted by geoff. at 1:17 PM on September 2, 2009 [1 favorite]


Move Over America - there's a new asshole on the map!
posted by Graygorey at 1:18 PM on September 2, 2009


Taxes in the context of how poorly American citizens living abroad are treated, is a very touchy subject.

In practice it works like state income -- if you work in one state and live in another, your state of residence generally subtracts state tax you paid in your working state from what you would owe in your state of residence. If your residence state taxes are higher, you only pay the difference.

It by no means works like this as you're ignoring some key details, for example the entire issue of timing. Tax year in the US runs from January to December, filing deadline is April 15th following year.

In the UK the tax year runs from April 6th to the following April 5th. Filing deadline is the following January. There is a clear misalignment regarding how income is taxed in the two countries. This complicates matters a lot as it turns out.

So you're correct in that Americans living abroad get tax credits, but the simple fact that the tax years don't align mean I end up paying in one country only to get credit in another. No cash but a credit, as the US runs what they call tax loss carry forwards, so no cash ever comes back my way only a "credit" that I can use to offset future taxes.

Another detail - just who prepares an American citizen's taxes when they reside abroad? The US domestic returns are complicated enough for most citizens living in America to seek professional advise. Factor in two sets of returns (Mrs Mutant is Dutch, so for me I'll soon have to file three, different and conflicting returns) with different timing, taxable / non taxable items, changing nominal rates across the two tax years, different exchange rates, changing tax laws and it becomes very difficult for someone living abroad to do their own taxes.

I've got an MSc in Quantiative Finance and an MBA and I need professional help to get this done - filing two sets of returns costs me about three thousand pounds every year.


You're not taxed twice on the same income though. Americans working abroad have to file US tax forms, but in practice rarely pay any US tax, because our tax rates are generally lower than anywhere else.

This is only true for the first $80K Americans earn. If you make more than this threshold - and they've been gradually reducing the exclusion cap - you most certainly will be taxed twice.

Its pretty damn easy to earn that much abroad just from currency exchange rates - the dollar is getting weaker and probably will continue to do so in the near term.

Owing US taxes when they've been sold the idea of living and working abroad free of US taxes is something that comes as a nasty surprise to many new American ex-pats. And taxes aren't restricted to just cash received; you're taxed on any housing you receive, tax equalisation, flights back home, foreign pension contributions, foreign language lessons, security details assigned, pretty much any benefit that might make a long term assignment palatable or in some parts of the world (I've worked in Lagos and other parts of Africa where bodyguards were sometimes needed) survivable.

There are ways to sharply reduce your taxable obligation, but they take a lot of planning, something you really need professional (billable) assistance and planning to achieve.


US citizens living abroad do get benefits from the US, like consular assistance and, occasionally, the Marines coming in to get them if needed. I'm not arguing the merits of the details of current US tax regulations for citizens living abroad, just saying that a US passport is a lot more than an accident of birth.

This is a very strange one - the United States is one of exactly THREE nations that practice global taxation on their citizens, the other two being Eritrea and The Philippines. No European nation taxes citizens like this, and yet they'll come get their nationals if there is a problem, so I'm not sure I'd accept this as a justification for levying global taxes on ex-pats.

And consular assistance is overrated. I spent a lot of time living and working in Africa, never had to use consular assistance but concede it might be of value if I did have a problem. But truth be told, I'd rather they bill me after the fact once I have used those services rather than every year on the off chance I might need to see the consul or one of his attaches.
posted by Mutant at 1:24 PM on September 2, 2009 [9 favorites]


For us Americans who choose to live and work abroad, this is a serious problem.

I don't mean to be a dick, mutant, but surely it would be fairer to say that for Americans who choose to live and work abroad and who have lots of money, this is a serious problem.

(unlike other countries Americans residing out the the United States still are obliged to pay domestic taxes)

...iff their income is high enough logical-and if the taxes they pay to their country of residence are low enough.
posted by ROU_Xenophobe at 1:37 PM on September 2, 2009


If they don't want to do business here, that's great. Seems like the feeling is mutual.
posted by empath at 2:20 PM on September 2, 2009


It sounds like the law is a big mess up, according to Mutant, but practically speaking, if you live overseas and collect income overseas and deposit it into foreign institutions, how would the US ever know you had an income? Is that what this hullaballoo is about, that foreign banks are providing bank statements on US citizens to the IRS? I mean, how else would they find out?

I'm no millionaire (hell, I'm barely a thousandaire), and I don't condone tax evasion, but I'm afraid of any government that has too much power. I think it's a good thing that some people are able to 'stick it to the man', even if it does tend to benefit the wealthy. Although, when I think about it, the truth is, some 3 million people a year in the US don't even file tax returns, and they're not all millionaires, and they put their money right here into US banks or use check cashing outfits and don't have bank accounts.

I pay my taxes and I find it grossly unfair that so many wealthy people pay so little in taxes; however, I have no problem with offshore tax havens. Wealthy people probably avoid more taxes through completely legal tax loopholes and accounting methods than they do by squirreling money away in tax havens.
posted by PigAlien at 2:32 PM on September 2, 2009


American citizen here, living in Switzerland, not by any means rich, screwed out of between 10% and 20% of my Swiss income by the IRS in tax year '08 depending on how you count it and the final outcome, based on the fine print in the tax code (Hint to would-be expats: never leave your country of residence, not even on a daytrip). For that kind of money I'll pay Blackwater a la carte to evac me if Zürich ever gets too dicey. Which it won't.

As for TFPDF, yeah, maybe a little axgrindey, but it raises a scary point. There's rumors that Swiss banks (the Post included) might look at the cost-benefit of holding money for American citizens in the face of IRS imperialism and decide it's not worth it. That happens, I'm basically boned, as you need a bank account to do basically anything here.

But don't let me get in the way of a nice righteous uninformed tax cheat hate-on. :)
posted by Vetinari at 2:36 PM on September 2, 2009 [2 favorites]


Heck, you should be the one hating the tax cheats for blurring the line between "American living in Switzerland" and "American abusing Swiss banks".
posted by smackfu at 2:48 PM on September 2, 2009


I'm sure the US only freezes the overseas accounts of tax evaders, and never goes after Muslim charities or businesses. I'm sure they'd also never seize assets of Antigua/Antiguan businesses related to suspended copyright / the online gambling SNAFU.

Yes, the Swiss are protecting a lot of criminals, assholes and tax dodgers, but I'm sure they have a few clients here and there who have a legitimate reason to be protective of their assets and privacy (and may even be paying taxes).
posted by BrotherCaine at 3:00 PM on September 2, 2009


"Retribution for the UBS tax-cheating scheme run in the US ... just makes the rules so hard that "is not worth it" anymore."

So, the new regulations make it so that crime doesn't pay anymore? Awwww.

"I think we are just sick and tired of the USA demanding that the world play by its rule or else it will take its ball and go home."

Yes, but the thing you don't get is... it's the US' ball.

The Swiss have no inherent right to have wealthy US tax evaders give the ball to them for safekeeping, splitting the illegal profits when the Swiss rent the ball out to whatever dictators or criminals they choose to deal with.

The US gave Switzerland rules under which it could borrow its ball, in a way that would guarantee that they got what was owed to them, and no more. It was the Swiss who chose to give the ball back.
posted by markkraft at 3:08 PM on September 2, 2009


Nuke the Swiss? The country where a bomb shelter for everybody is mandatory?

It's the only way to be sure.

(The sticker link was tongue-in-cheek by the way)
posted by vectr at 3:09 PM on September 2, 2009


Mutant, I'm not arguing the current tax code is fair or right, as I said. It sounds to me like the regulations are a lot nastier than they used to be and, frankly, like a lot of financial planning and accountancy work that used to be handled by an employer that sent an individual abroad is now dumped on the individual expat even when there's an employer sending you abroad. That's not based on anything you've said, particularly, either, but a general sense based on what I knew about expat postings in the 80s and what I hear about them now. Having said that, pla suggested Americans abroad derive no benefits from US taxes, and that's blatantly wrong.

Even if all you ever get from being in a country with an embassy or consulate is the insurance value of having those officials available in case something does go wrong, there's a value to that. Further, since you've lived in Africa, you've certainly seen the difference between what a US passport (or a British passport) means vs what passports from other African nations mean in terms of getting by. Similarly, I can't believe things have changed so much that a US passport doesn't carry certain privileges in dealing with the UK Home Office that, say, an unrelated Third World non-Commonwealth passport doesn't. This is part of the value of your US citizenship that affects your life abroad. It's a public good financed by your taxes (and mine, even if I don't leave the US in any given year) in the same way that your taxes and mine finance public goods in the US every year.

The fact that the current tax code sucks for expats and that taxation of global income is a severe burden on expats between the taxes and the necessary financial planning has nothing to do with the fact that citizens benefit from citizenship (as supported by tax-based public spending) and the principle that their residence abroad shouldn't automatically exempt them from paying taxes because they derive no benefits from them. And if you're going to suggest you should only pay for a la carte benefits, we're far enough apart on the baseline of what it means to be a citizen that there's no point in discussing it further.
posted by immlass at 3:24 PM on September 2, 2009


Wealthy people probably avoid more taxes through completely legal tax loopholes and accounting methods than they do by squirreling money away in tax havens.

Cite? (Well, technically, using legal tax loopholes is avoiding taxes, squirreling it away is evading taxes, two morally distinct activities.)
posted by Mental Wimp at 3:27 PM on September 2, 2009


Similarly, I can't believe things have changed so much that a US passport doesn't carry certain privileges in dealing with the UK Home Office that, say, an unrelated Third World non-Commonwealth passport doesn't.

You're right to point out the value in these things. However as a Canadian in the UK I obtain the exact same list of benefits you describe without having to pay tax to the homeland from which I'm absent.

It's not really about right/wrong, as you can argue both sides. I think what Mutant and others were trying to highlight is that the US expat tax situation is highly abnormal relative to other countries, and this certainly has effects ("chilling" or otherwise) on both their worldview and approaches to working / banking / living abroad.
posted by flaneur at 3:38 PM on September 2, 2009


I don't have a cite, MW, because I'm simply saying what I suspect is probably the case. I could not only be wrong, but I could be profoundly wrong. Yes, tax avoidance is different from tax evasion, but that's my point... It's a smoke and mirrors show. The IRS goes after tax evaders in a big show of catching criminals, while congress writes the tax code to allow the wealthy to simply avoid taxes legally, if they're willing to play the necessary accounting games.

Just doing a back-of-the-envelope speculation, the man at the bank said that approximately 1 trillion CHF is suspected to be 'black money'. The current exchange rate is close to parity, so that's about $1T US. Now, clearly not all of that money belongs to US citizens, and most of it is probably longer term cash assets rather than annual income. Assuming that part of it is income, it is most likely capital gains income and not wages or salary. If it were taxed as 100% US capital gains income, that might be $150B per year in lost taxes to the US government. I don't know how you'd go about estimating how many taxes are lost to legal tax-avoidance loopholes. In any case, it's probably a better assumption that only a fraction of that money belongs to US citizens and is taxable income, and would most likely still be subject to the usual tax avoidance schemes if it weren't parked in secret accounts.
posted by PigAlien at 3:41 PM on September 2, 2009


If it were taxed as 100% US capital gains income, that might be $150B per year in lost taxes to the US government.

Wait, the Swiss banking system is taking in $1Trillion/yr. in deposits, or there is $1Trillion 'black money' in the system total? I suspect your $150Billion is more than a little high, unless maybe you're counting all the penalties for 20+ year old tax liabilities, etc...
posted by BrotherCaine at 3:47 PM on September 2, 2009


That's my point, BrotherCaine, I don't believe 100% of the deposits are taxable annual income, but was just saying on the extreme end of things, that would be the most the US might be losing to tax dodgers putting their money in Swiss accounts if we made the assumption (unlikely) that all of that money was taxable as annual income. I'm sure the real figures are much, much smaller, but have absolutely no way of estimating how much smaller, but we could guess at an upper end, which is what I did, and I don't think that upper end is at all realistic.
posted by PigAlien at 4:11 PM on September 2, 2009


Beverly has an interesting argument over at SwissInfo, which makes at least as much sense as many other US:ian arguments I've seen today:

I have been raised in the True Christian Religion and truly believe in the right of the UNITED STATES to impose income tax upon all Americans, as, Jesus truly points out in Matthew 11 12:14 and numerous other scriptures. The only Americans who would gain if the income tax was abolished would be Canadian women like Eldon, and Swiss bankers.

I'm probably looking in the wrong place in the wrong bible, though, because surely she doesn't mean that Jesus was speaking in support for the IRS when he said things like "the violent take it by force" (11:12) or "[they] held a council against him, how they might destroy him" (12:14)?
posted by effbot at 4:20 PM on September 2, 2009 [1 favorite]


Well . . . bye.
posted by John of Michigan at 7:16 PM on September 2, 2009


effbot's post ironically makes no sense.
posted by smackfu at 7:32 PM on September 2, 2009


smackfu, SWIFT isn't a financial middleman. They don't process funds, they just run the network the instructions move over. And even for an international wire transfer, you're still only talking pennies per message, regardless of how much money that message is moving.
posted by Lazlo at 9:19 PM on September 2, 2009


This is a very strange one - the United States is one of exactly THREE nations that practice global taxation on their citizens, the other two being Eritrea and The Philippines. No European nation taxes citizens like this, and yet they'll come get their nationals if there is a problem, so I'm not sure I'd accept this as a justification for levying global taxes on ex-pats.--Mutant

To be clear, most countries tax their citizens if they are working abroad, if they have at least a part time residence or economic interest in their own country.

If you are completely an ex-pat and are still getting taxed, then I suppose that is a bit strange, but it is also really a different subject than this post, which is about the IRS finally going after all the billions hidden away during the rampant corruption allowed during the last few administrations.

And, heck, Bank of America has a branch in Switzerland. Open up an account there.
posted by eye of newt at 9:21 PM on September 2, 2009


it is also really a different subject than this post

Well, I think one could make the argument that if the US did not tax the overseas income of its citizens (above the statutory limit of $87,600, of course), this issue wouldn't have arisen in the first place. I agree with Mutant that it is quite peculiar how the US insists that its nationals (and even folks who just happen to fulfill the "Substantial Physical Presence Test" requirements mentioned in the PDF) pay income tax to the IRS, regardless of where said income was earned. Plus, having to deal with the differing tax regulations of the US and of where one lives really requires a professional, which is just another "tax," in a sense.

I'm agnostic about it at the moment, since my income is within the exemption limit, but what if the US decides it's hard up for cash and eliminates it? You'll see a lot of folks give up their citizenship, I'll bet -- only to be socked with tax demands from the US government. I'm not sure how I feel about that, regardless of the intent of that part of the tax code.
posted by armage at 10:08 PM on September 2, 2009


which is about the IRS finally going after all the billions hidden away during the rampant corruption allowed during the last few administrations.

This. I wonder how much of the Iraq reconstruction funds are hidden away in Switzerland?
posted by benzenedream at 11:33 PM on September 2, 2009


No Robots wrote: Hey, I didn't say that there shouldn't be international e-banking. Most people can currently use their accounts for deposits and withdrawals anywhere in the world.

There are still some places on this earth where you need cash to transact business. A lot of them, actually.
posted by wierdo at 1:16 AM on September 3, 2009


Well, I think one could make the argument that if the US did not tax the overseas income of its citizens (above the statutory limit of $87,600, of course), this issue wouldn't have arisen in the first place.

What? The widespread practice of wealthy American residents tucking away their gains in Swiss bank accounts to blunt their tax liabilities is why this issue arose. Quit blurring this issue. It's not about taxing ex-pats--it's about tax evaders and other criminals resident in America abusing the anonymity of the Swiss banking system.
posted by saulgoodman at 6:39 AM on September 3, 2009


Why did the US start taxing overseas income? Was it because rich folk were dodging taxes by saying they were foreign residents?
posted by smackfu at 7:09 AM on September 3, 2009


Money laundering.... US cosmetic surgeons, German dentists, Lawyers from France

...Boys from Brazil.
posted by rokusan at 8:08 AM on September 3, 2009


smackfu wrote: Why did the US start taxing overseas income? Was it because rich folk were dodging taxes by saying they were foreign residents?

Does it really matter? As a matter of fairness and practicality, if you don't live in the US, foreign-source income shouldn't be taxed here in the US. Income derived from the US (paid to you by a US company or person) should be taxed the same regardless of where you live.
posted by wierdo at 9:38 AM on September 3, 2009


Yes, I think it's always relevant why a law was put in place, because you need to know if your alternative solution solves the same problems.
posted by smackfu at 9:49 AM on September 3, 2009 [2 favorites]


Mutant: I did try to cover my ass by pointing out that my oversimplification was one as well. And I did know about the income exemption limit, but not about the consequences of the staggered tax year, or the lack of cash refund. That blows.

Really, our tax system is, as I said, a total clusterfuck. It should be rebooted from zero.
posted by rusty at 10:00 AM on September 3, 2009 [1 favorite]


Really, our tax system is, as I said, a total clusterfuck. It should be rebooted from zero.

In the current political climate? No way. We'd end up with a new system that just taxed the homeless and people seeking medical care.
posted by saulgoodman at 11:11 AM on September 3, 2009


Does it really matter? As a matter of fairness and practicality, if you don't live in the US, foreign-source income shouldn't be taxed here in the US. Income derived from the US (paid to you by a US company or person) should be taxed the same regardless of where you live.

The problem is that cash is fungible and so it's hard to say with a multinational corporation where the money is "sourced". For example, my company could issue my paychecks from its German office. Is that foreign-sourced? For the US (or any taxing authority) to have to inspect the books of a multinational company to figure out whether or not to tax the money. I assure you that every big honcho in such a company's pay would come from "foreign sources" if that's the way the U.S. tax system worked.
posted by Mental Wimp at 2:25 PM on September 3, 2009


Can I have a do-over? I apologize for the atrocious writing in that last paragraph. It limbos under even my low standards.
posted by Mental Wimp at 2:27 PM on September 3, 2009


What? The widespread practice of wealthy American residents tucking away their gains in Swiss bank accounts to blunt their tax liabilities is why this issue arose. Quit blurring this issue. It's not about taxing ex-pats--it's about tax evaders and other criminals resident in America abusing the anonymity of the Swiss banking system.

I'm not blurring the issue -- I'm well aware why the issue arose, and I have no problem with going after tax evaders.

My only point was that if the tax code did not contain that provision (to tax foreign income earned abroad over a certain amount) there would be nothing to go after. The other side of that is that if Switzerland considered tax evasion a crime, the matter would have been settled in Switzerland, and that would've been it.
posted by armage at 9:27 PM on September 3, 2009


My only point was that if the tax code did not contain that provision (to tax foreign income earned abroad over a certain amount) there would be nothing to go after.

Not sure I follow you. People deposit cash earned in the US in Swiss accounts to dodge their tax liabilities all the time. So even if the provisions on foreign income earned abroad weren't in the tax code, we'd still have to go after tax evaders hiding their taxable earnings in Swiss accounts.

And to your other point, it doesn't matter whether Switzerland considers tax evasion a crime or not, although Swiss banks have made it clear their general attitude is don't ask, don't tell where American tax evaders are concerned. Why should they care? It's not a problem for die Schweizer if the US is hemorrhaging tax revenue.
posted by saulgoodman at 9:59 PM on September 3, 2009


Mental Wimp wrote:

The problem is that cash is fungible and so it's hard to say with a multinational corporation where the money is "sourced". For example, my company could issue my paychecks from its German office. Is that foreign-sourced? For the US (or any taxing authority) to have to inspect the books of a multinational company to figure out whether or not to tax the money. I assure you that every big honcho in such a company's pay would come from "foreign sources" if that's the way the U.S. tax system worked.


Well, by foreign sourced I mean "not paid by a US company" logical AND "none of the work paid for was done while physically present in the US," so if you were in the US it wouldn't matter if you were being paid out of the German office. That would only matter if you were overseas.
posted by wierdo at 1:20 PM on September 6, 2009


"not paid by a US company" logical AND "none of the work paid for was done while physically present in the US,"

So if I work for BP in Great Britain and met in the US with staff twice a year, the US could tax my earnings? It's not clear how you would implement your strategy. Maybe you base it on the majority of time spent in the US. Or prorate it. Or make it a matter of residence.

Maybe if we just stick with people who call the US home and tax the income of those folks regardless of where it is "sourced", it would simplify the matter. I think the "sourced" part is problematic, especially if you try to distinguish between US and non-US companies.
posted by Mental Wimp at 11:34 AM on September 7, 2009


Zurich hospital turns away US health tourists
posted by homunculus at 11:06 AM on September 21, 2009


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