The Wrongologist

You may have missed the news last week that bankers at Credit Suisse used cloak and dagger tactics to help wealthy American clients stash $ billions in assets out of sight of the IRS, according to a Senate report.Credit Suisse is under investigation by the US Justice Department for allegedly aiding tax evasion by its rich American clients. The bank opened a special Zurich airport branch identified with only a code name (SIOA5) so customers could fly in, meet their private bankers and quickly hit the slopes, or quickly fly back to the US.

In the US, VIPs would use a secret elevator without buttons and operated by remote control to be whisked to Credit Suisse private banking suites. The Senate report says that bankers hid bank statements in the pages of Sports Illustrated rather than sending account statements and leaving paper trails.

According to CNN, there were some really fun ways that Credit Suisse customers moved their money:

Surely, that was legitimate money being transported for legitimate purposes by a person who was very concerned about being illegally separated from her dough.

According to the Senate report, Credit Suisse held more than 22,000 accounts for US customers, with assets valued at between $10 billion and $12 billion. Up to 95% of the accounts weren’t reported for tax purposes to the IRS. Sen. Carl Levin, (D-MI) who heads the Senate committee that produced the 175-page report, criticized the US Department of Justice, the bank and Swiss authorities, saying at the hearing: (brackets by the Wrongologist)

That’s 1% of the total, for those of you keeping score at home.

Credit Suisse is the just the latest Swiss bank to come under scrutiny. The government cracked down on the Swiss bank UBS in 2009, which paid $780 million to settle similar allegations.

Hiding this information is the reason that the US Congress passed the FATCA legislation in 2010. The purpose of the law is to make foreign financial institutions identify accounts held by US taxpayers and report them to the IRS. FATCA also requires US citizens, including individuals who live outside the US, to report their financial accounts held outside of the US.

The United States and Switzerland signed a FATCA agreement in February. But the information exchange pact cannot go into force without Senate ratification of the US-Swiss tax treaty originally executed in 2009.

If you think that everyone in the Senate must be in favor of eliminating tax evasion
and this will be easily ratified in the Senate, you would be wrong. In fact, good ol’ boy Sen. Rand Paul (R-KY) has been the sole blocker of a vote to ratify the treaty with the Swiss.

Rand may be trying to run out the clock. The Treaty was written in 2009, and the statute of limitations is (generally) five years. So maybe we can expect Paul to change his mind and vote for ratification in 2014? Isn’t the past 5 years sufficient time for anyone wanting to cover their tracks to move their untaxed assets from Swiss banks to another jurisdiction that has yet to sign a treaty with the US?

Kentucky’s Tea Party darling says the treaty infringes on privacy rights. From Sen. Paul:

Nice. Sen. Paul believes that you need proof of a crime for which it is impossible to develop the facts to make the case that a crime was committed, without the treaty he is holding up.

Naturally, Credit Suisse is hiding behind Sen. Paul’s blockage of the Treaty. At the hearing in Washington last week, Credit Suisse’s American operation’s CEO, Brady Dougan said: (emphasis by the Wrongologist)

Paul’s protest of the Treaty is also linked to his desire to repeal FATCA, because the “privacy rights” of criminals hiding billions of US taxpayer dollars is more important than the government’s right to collect taxes.

The Wrongologist wrote in February that the Republican National Committee (RNC) approved a resolution that added the repeal of FATCA to its 2014 platform.

That means any effort by Harry Reid (D-NV) to bring the Treaty ratification to the whole Senate in order to override Sen. Paul’s blocking, would require some Republicans to join with Democrats in the override effort. Plus, ratification of treaties requires the vote of 67 senators. That isn’t likely, now that their 2014 platform opposes the underlying law that enabled the Treaty.

Despite Sen. Paul’s privacy concerns, no one is asking the rich to pay unfairly − they already get all kinds of tax breaks − but to encourage tax evasion seems to be far beyond the Republican’s usual pale.

How about having the rich simply pay their fair share and watch the federal deficit which they are so concerned about, fall, without requiring Americans to give up food stamp subsidies or funding for long term unemployment benefits?

It is always so curious. Republicans talk about cutting the deficit, but their 2014 platform underwrites tax evasion instead of tax compliance for their wealthy overlords.

Those of us who pay our taxes, work all our lives, and watch our children’s opportunities for a good life vanish due to the horrific economic disparity that is now America, require more of Congress.

We’re running out of cake ….