TAX DISPUTES IN THE US
CD: In your opinion, what important developments have emerged in the US tax regime over the past 12-18 months?
Fisher: The most significant developments in 2013 and 2014 are on the international tax enforcement front. The US Department of Justice (DOJ) launched an unprecedented program in August 2013 for Swiss banking institutions to come forward and disclose activities that may have violated US tax law, to pay penalties and avoid criminal prosecution; 106 institutions applied to participate in the first phase of the program by year’s end. In May 2014, in a highly coordinated effort with US bank regulators, the US indicted a prominent Swiss bank, rather than deferring prosecution of the institution, as had long been the practice in similar cases. The bank pled guilty and paid $2.6bn in fines in connection with assisting US clients to conceal assets from the Internal Revenue Service (IRS). US authorities continue to prosecute US persons who have failed to disclose secret overseas accounts and to investigate and indict foreign banks, bankers and other ‘enablers’.
Gregor: The most important development that has emerged in the US tax regime over the past 12-18 months relates to reporting of offshore assets and income, as well as related enforcement efforts. The federal government and other state taxing authorities continue to pursue offshore tax evasion schemes. US taxpayers are subject to US income tax on worldwide income, and it is illegal to hide assets abroad, or to help US taxpayers hide assets abroad, in order to avoid or evade US tax. The DOJ is going after financial institutions that it alleges have helped US taxpayers hide assets abroad, such as Credit Suisse, UBS and Bank of Tokyo-Mitsubishi UFJ. The DOJ is continuing its efforts and expanding its reach to other banks: on 30 April 2014, the DOJ issued a press release stating that a federal court had entered an order authorising the IRS to serve a ‘John Doe summons’ to allow it to obtain names of US taxpayers who may have held offshore accounts at Canadian Imperial Bank of Commerce FirstCaribbean International Bank. We are expecting to see a significant uptick in IRS audits of individuals holding assets at these accounts in the upcoming months.
Jul-Sep 2014 issue
Charles River Associates (CRA)
Latham & Watkins
Ropes & Gray LLP