Friday, August 14, 2009

Fess Up or Stay Quiet?

UBS agreed to release the identities of thousands of clients to the U.S. Above, its New York offices.

One post to the discussion site for this article captures my opinion as strongly as I feel it: “I am sick of people who willfully try to duck their tax responsibilities. They believe it's okay so long as they don't get caught and that's just plain wrong."

Some people do not make a distinction between right and wrong, but between selfishness and gullibility: if I can get away with it, and it's in my favor, then it's fine. Except it isn't.

The Internal Revenue Service is staging a massive poker game. It has invited 52,000 UBS AG account holders to the table.

Now that the U.S. and Swiss governments have resolved a longstanding dispute about disclosing the identities of secret Swiss bank accounts, the holders face an acute dilemma: Do they confess their tax-evasion sins and possibly give up a large portion of their offshore accounts? Or do they stay quiet, hoping to avoid detection, but risk far greater penalties or even criminal prosecution if exposed to authorities?

Their decision is made harder because the IRS is doing its best to keep account holders in the dark about both the timing and reasons for which names are disclosed. That is because the IRS hopes to use the threat of disclosure as leverage, coaxing offshore tax evaders to come clean on their own.

While holders of secretive Swiss accounts are reluctant to talk to the media, their lawyers say many are still undecided. One factor in play: The IRS only has resources to prosecute about 1,000 criminal tax cases each year. "I'm surprised at how many are willing to gamble," said Kevin Packman of Holland & Knight in Miami.

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