November 26, 2009

Switzerland's Oldest Bank Rejects the US

The IRS UBS settlement may be good for the government coffers but it may be damaging to the US investment fraternity in the long run. Some even call the action of the IRS to demand details of thousands of UBS bank account holders suspected of evading taxes an act of 'financial apartheid'. As a result of disruptive rules imposed on Swiss and other offshore banks of which the IRS UBS agreement is a result, many Swiss banks have decided that they do not want business from US citizens who are subjected to lots of costly and legally damaging US government bureaucracy.

One such bank is Wegelin and Co., Switzerland's oldest private bank that announced it would stop doing business in the United States and with Americans. The bank, founded in 1741 in St. Gallen with over $17.9 billion in client assets now under its management, claimed they were put in an 'untenable situation' by the requirements of the IRS and anticipated changes in US estate laws by the US Securities and Exchange Commission (SES) which could make non-US residents liable to US taxation if they inherit US securities. On top of that there is the requirement that offshore banks giving advice to US clients must register and meet requirements set by the SES, which many view as the US over-stepping their jurisdiction and imposing US laws onto non-US entities. Even some members of the US Congress are of the opinion these extraterritorial requirements have gone too far.

Thus Wegelin bank has issued an official letter explaining that it is being expected to know which of its US clients were dodging taxes and which were not; an impossible task in light of the unclear definitions of the proposed IRS rules. As a result, Wegelin has advised all its clients to pull out of all investments involving US securities. And in an apparent dig at the US, Wegelin expressed its opinion that the Americans think too highly of its own (American) attractiveness as a financial center.

This development has come a week after the IRS and UBS hammered out their settlement in which UBS was compelled to release information on 4,450 of its US clients whom the IRS suspects of evading taxes.

After Wegelin, who next?

At this point, at least two other Swiss banks, UBS and Credit Suisse have shunned its US clients and no longer solicit business from the US. However, other Swiss banks are still entertaining US customers. It has been reported that some banks in Britain have also held discussions about banning US clients.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.