Due Diligence: by Brian Mahany
In recent years, several European governments have resorted to stealing confidential bank information. Germany went so far as to bribe a bank employee in Lichtenstein to obtain a list of bank customers. After the theft, German officials reportedly offered some type of witness protection to the data thief. While that behavior is abhorent, Germany isn’t the only country to resort to underhanded tactics to catch tax cheats. France’s Supreme Court, however, says that stolen information can’t be used for tax evasion prosecutions.
Because of information sharing agreements, that decision may have implications in the United States as well.
According to the decision, in 2007 an HSBC employee in Geneva, Switzerland illegally copied thousands of account records and tried to sell the data to French revenue officials. France, like the U.S. has a problem with citizens hiding money in Swiss banks to evade taxes. Although France didn’t purchase the information, it apparently arrested the man after Swiss police issued an arrest warrant for the theft. France then seized the customer records, placed the man in witness protection and shared it with other countries. (Talk about the old adage that there is no honor among thieves!)
After several years of legal wrangling, the French Supreme Court correctly ruled the names of accounts holders was illegally seized.
What does this mean for other countries that may have shared in the information?
Although a foreign court cannot tell the IRS what to do, the ruling sends a clear message that “two wrongs do not make right.” The ruling is certainly persuasive authority for other countries that may want France and Germany to do their dirty work for them.
The ruling is a victory for privacy but in the bigger picture, those with unreported foreign accounts are running out of places to hide. The current IRS amnesty program (the Offshore Voluntary Disclosure Program sometimes referred to as OVDP or OVDI) is a good starting place for those that have problems. With civil penalties at 50% of the high account balance for each year the account was not properly reported, the amnesty looks like a bargain. For those who did not act “willfully,” the IRS has a traditional voluntary disclosure procedure, although the trade off for even lower penalties is usually an audit.
The tax attorneys at Mahany & Ertl have helped many taxpayers with offshore reporting issues including criminal tax investigations, FBAR compliance, penalty abatements and this year, with FATCA compliance. If you aren’t familiar with these terms and have offshore accounts, you need professional tax advice!
For more information please contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at brian@mahanyertl.com. All calls are kept in strict confidence.
Mahany & Ertl - America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS services available in all jurisdictions.
In recent years, several European governments have resorted to stealing confidential bank information. Germany went so far as to bribe a bank employee in Lichtenstein to obtain a list of bank customers. After the theft, German officials reportedly offered some type of witness protection to the data thief. While that behavior is abhorent, Germany isn’t the only country to resort to underhanded tactics to catch tax cheats. France’s Supreme Court, however, says that stolen information can’t be used for tax evasion prosecutions.
Because of information sharing agreements, that decision may have implications in the United States as well.
According to the decision, in 2007 an HSBC employee in Geneva, Switzerland illegally copied thousands of account records and tried to sell the data to French revenue officials. France, like the U.S. has a problem with citizens hiding money in Swiss banks to evade taxes. Although France didn’t purchase the information, it apparently arrested the man after Swiss police issued an arrest warrant for the theft. France then seized the customer records, placed the man in witness protection and shared it with other countries. (Talk about the old adage that there is no honor among thieves!)
After several years of legal wrangling, the French Supreme Court correctly ruled the names of accounts holders was illegally seized.
What does this mean for other countries that may have shared in the information?
Although a foreign court cannot tell the IRS what to do, the ruling sends a clear message that “two wrongs do not make right.” The ruling is certainly persuasive authority for other countries that may want France and Germany to do their dirty work for them.
The ruling is a victory for privacy but in the bigger picture, those with unreported foreign accounts are running out of places to hide. The current IRS amnesty program (the Offshore Voluntary Disclosure Program sometimes referred to as OVDP or OVDI) is a good starting place for those that have problems. With civil penalties at 50% of the high account balance for each year the account was not properly reported, the amnesty looks like a bargain. For those who did not act “willfully,” the IRS has a traditional voluntary disclosure procedure, although the trade off for even lower penalties is usually an audit.
The tax attorneys at Mahany & Ertl have helped many taxpayers with offshore reporting issues including criminal tax investigations, FBAR compliance, penalty abatements and this year, with FATCA compliance. If you aren’t familiar with these terms and have offshore accounts, you need professional tax advice!
For more information please contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at brian@mahanyertl.com. All calls are kept in strict confidence.
Mahany & Ertl - America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS services available in all jurisdictions.
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