UBS, IRS Tax Evasion Deal Finalized, Details Still Hazy

Sources are reporting that the deal reached between the U.S. government and European banking giant UBS earlier this month has, today, been made official, both parties initialing an agreement that could hold vast implications for the roughly 52,000 Americans believed to be hiding taxable assets in secret Swiss bank accounts. Stuart Gibson, a Justice Department lawyer, told Alan Gold, the federal judge who had been overseeing the matter, that the two sides had reached an accord, thus settling the contentious lawsuit that had been pitting US tax authorities against Swiss financial secrecy since early this year.

While news that a deal had been reached and initialed is plentiful, details about what, exactly, this deal will entail are few. Pretty much everyone who’s written about this speculates that it will involve the bank giving up at least a chunk of the identities that it had been fighting since February to keep secret, but little is known beyond that. Details have not been released as to how many secret bank accounts will be revealed, what U.S. tax authorities will do once this happens or what, if any, monetary compensation will result from the case. Also not known is whether this opens the door to further disclosures by UBS to the U.S. government, in direct opposition to a tradition of financial secrecy that dates back to the medieval era.

Perhaps the secrecy is to prevent the 52,000 Americans, holding (and hiding) about $20 billion taxable assets, from determining the likelihood of being targeted by the IRS – blowing this cover could cause them to gas up the jet and leave Switzerland for any of the other myriad countries known for aiding and abetting tax evasion, like Luxemburg, Lichtenstein or the Cayman Islands. Who knows for sure? It’s a known unknown.

Another known unknown is whether the results of this case can provide legal precedent for governments of other countries to seek the identities of their own citizens suspected of holding secret Swiss bank accounts and whether this, in turn, will prompt the Swiss government to seize the records of targeted banks, as they had threatened to do with UBS before the deal was reached (see paragraph 10 of the link).

Details will probably be released when the deal is officially signed (an initializing is but a fraction of a name, after all). For those modern-day Crassi in cold sweats over the prospect of being discovered, the IRS is offering an amnesty program, allowing tax scofflaws to report their previously invisible earnings to avoid criminal prosecution. Though, our nation’s million and billionaires will have to move fast if they want to take advantage – the program is only in effect until September 23, 2009.