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IRS tries to lift foreign professional secrecy at major accounting firms
By admin | July 10, 2008
It’s no news that accountants have been drafted as spies in the “War on Privacy”. What’s new this week, though, is that the IRS is beginning to put pressure on the big international accountancy firms with presence in the US (Deloitte, KPMG and the like) to in turn apply pressure to their overseas associates who are auditing foreign banks – all to spy on US citizens!
This clearly breaks a whole raft of laws around the world. First of all, accountants auditing foreign banks are there to check up on the bank’s own accounts and compliance, not that of the bank’s clients. But apart from disrespecting bank secrecy laws, the IRS wants the auditors to disregard their legal and ethical professional secrecy obligations too!
According to an article on Tax-News.com, the US Government Accountability Office supposedly “identified USD19 billion flowing to countries that could not be identified, and USD7 billion flowing to individuals that could not be identified.” That is quoted as the reason for this latest intrusion. Now I don’t know about you, and I don’t have great confidence in the efficiency of governments, but the theory that 19 million dollars could just disappear from the USA and the government cannot figure out even what country it went to, doesn’t hold much water with me.
Naughty Foreign Banks!
“We are concerned generally by what we are seeing and hearing” about the conduct of some foreign banks, the IRS told the audit firms in an email, which was quoted by Bloomberg News in an article published on 3rd July.
In June, former UBS Banker Bradley Birkenfeld pleaded guilty to conspiring with an American billionaire real estate developer, Swiss bankers and his co-defendant, Mario Staggl, to help the developer evade paying USD 7.2 million in taxes, by helping to hide USD200mn of assets in Switzerland and Liechtenstein. Meanwhile, on 1st July, a federal judge in Miami issued an order authorizing the IRS to request information from Switzerland-based UBS about US taxpayers who may be using Swiss bank accounts to evade federal income taxes.
The so-called “Qualified Intermediary” (QI) program allows foreign banks to report certain details about their US clients to the IRS in return for a more lenient rate of withholding tax on client income. However, the big loophole is that the system covers individuals and not companies. Many wealthy clients of offshore banks have been encouraged (often by the banks themselves) to set up offshore corporations and foundatons to legally sidestep the reporting requirements.
While QIs participating in the program are audited by an outside audit firm, these auditors are there to ensure strict compliance with the letter of the law, not to report suspected cases of tax evasion or fraud. But it is understood that the IRS is keen to draft the big six audit firms as global financial spies.
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Topics: Banks and banking offshore | 1 Comment »
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July 11th, 2008 at 12:21 pm
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