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Archive for June 29th, 2009

About one month ago, British banks revealed that they may reject all American customers because the IRS insists on absurdly onerous rules. Now, Swiss banks are adding to the woes of America’s global workforce by announcing that U.S. citizens are no longer welcome. Needless to say, this is a huge inconvenience for the tens of thousands of Americans who live and work abroad. The IRS and the Obama Administration argue that this is an acceptable price to pay to compel greater obedience to the internal revenue code, but the academic research shows that lower tax rates are the best way to improve compliance. Unfortunately, the politicians in Washington want to raise tax rates even higher, which will create more incentive for tax evasion and tax avoidance. Bloomberg reports:

UBS AG and Credit Suisse Group AG, the country’s biggest banks, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers. While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about 30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers. “My bank doesn’t want to do that, so we wouldn’t accept an investment account for a U.S. person,” said Pierre Mirabaud, chairman of Mirabaud & Cie. and the Swiss Bankers Association, during a lunch at the American International Club of Geneva. …The U.S. has also proposed increasing reporting and oversight requirements for so-called qualified intermediaries — foreign banks that withhold taxes on behalf of the IRS. That may increase the cost of compliance and the risk of violating U.S. laws, said Charles C. Adams, managing partner at the law firm Hogan & Hartson LLP in Geneva. “American citizens are starting to feel like they’re Typhoid Mary,” said Adams who hosted a 2008 fundraiser for Barack Obama that featured actor George Clooney. “The Swiss simply don’t want American customers because it requires so much infrastructure and hassle that they don’t make any money.” Sandra Dysli, an American who has lived in Geneva for 40 years, said Bank Zweiplus AG, the Zurich-based joint venture of Basel-based Bank Sarasin & Cie. and AIG Private Bank, and a Geneva branch of Raiffeisen International Bank-Holding AG refused to open investment accounts for her. …Two members of the U.S. Congress, Carolyn Maloney and Joe Wilson, wrote a May 27 letter to Treasury Secretary Timothy Geithner saying that if the QI requirements are extended to cash or deposit accounts, “taxpaying Americans living abroad will have no place to bank.” “If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank?” wrote Maloney, a New York Democrat, and Wilson, a South Carolina Republican, who are co-chairmen of the Americans Abroad Caucus. …“The presumption is that you’re a bad person avoiding taxes if you live overseas,” according to Andy Sundberg, who founded Geneva-based American Citizens Abroad in 1978. “The IRS rhetoric is alienating and vindictive.”

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