WASHINGTON, DC – Offshore investing, banking, credit-card processing and content production have become topics of widespread debate among adult industry denizens in recent years, attracting throngs to “how-to” seminars at various industry trade shows.But be advised: With the monumental budget shortfall in which the current administration finds itself and the national debt growing daily, Congress wants to close some of the loopholes in federal tax law that make some offshore investments enticing. In fact, lawmakers already have called at least two foreign financial firms before investigative hearings into the practices they use to help Americans hide assets that could generate about $100 billion in additional tax revenues annually.
Blame a 109-page Senate report that accused European banks UBS AG and LGT Group of complicity in massive amounts of tax fraud. The former is based in Switzerland; the latter is owned by the royal family of Liechtenstein.
UBS representatives testified before a special hearing of the Senate Homeland Security and Governmental Affairs subcommittee. LGT provided requested documents but declined to send representatives; some of its clients testified instead.
Neither company was viewed favorably by the senators who conducted the hearing.
“Tax havens are engaged in economic warfare against the United States and honest, hardworking American taxpayers,” said subcommittee chairman Sen. Carl Levin [D-MI]. “Today we will look at two banks that relied on secrecy and deception to hide not just the tax avoidance schemes of their clients, but the actions they themselves took to facilitate U.S. tax evasion.”
UBS, which earlier this month was served legal papers by the Internal Revenue Service as part of a court-sanctioned investigation into its American clients, has said it is cooperating with Swiss and American authorities and will disclose records belonging to clients who may have violated tax laws.
LGT, on the other hand, is understandably sensitive about its business. Since February, when German authorities obtained a CD-ROM containing information about more than 1,400 of its customers who are accused of tax fraud and evasion, the bank has become the subject of investigations in several countries.
At issue in the U.S. cases is the failure of taxpayers to report assets with values exceeding $10,000 at any point during the tax year. Penalties for such omissions can cost up to 50-percent of the value of the assets.
Senators believe UBS has been particularly aggressive in helping its clients hide assets. The Senate report estimated the bank has 1,000 customers who have declared the value of their accounts to U.S. authorities and paid any taxes due. On the flipside, UBS reportedly maintains 19,000 undeclared accounts with a combined value of an estimated $17.9 billion. The report also alleges UBS actively assisted its American customers in hiding their accounts.
