In the century since the 16th amendment was ratified, allowing a federal income tax to be levied, rich Americans found a haven from taxation in Switzerland.
Americans are required to pay tax on income no matter where in the world it was paid. Most developed countries cooperate with each other’s need to collect revenue by having reciprocal tax treaties. They voluntarily agree to report any income paid to an American the same as income paid is reported in the US.
Switzerland has been an exception. It’s strict secrecy and privacy laws, it’s stable government, it’s high living standard and prosperous economy, and its unique geographical location made it the perfect tax haven country for the rich.
That began to change in 2009 with the prosecution of UBS, Switzerland’s largest bank. UBS paid a $780 million fine, and the Swiss government waived its long-standing secrecy requirement and allowed the bank to turn over US client names for about 4,700 accounts. It also committed to disclosing to the IRS all future accounts opened for US persons.
Here’s a partial list of the UBS-related legal matters that moved through the judicial system.
In 2011, Switzerland’s second largest bank, Crédit Suisse, was charged. The case did not proceed like the one for UBS. "Actions taken to obtain US client names and account information and to prosecute Swiss banks and banking professionals suspected of facilitating tax evasion initially
had a significant impact on Switzerland and the Swiss banking community."
Rather than provide the identities of US clients, the Swiss government wanted to negotiate a new tax treaty. The courts moved forward with charges against at least 8 Crédit Suisse bankers who had committed offenses in the US.
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By 2013 with the first guilty plea and sentencing accomplished, it was obvious that Crédit Suisse had engaged in a substantial conspiracy. On August 19, Switzerland agreed to a comprehensive solution for all of its banks, under the terms of a new tax treaty. It agreed to exit the tax haven business and to provide the identities of all US clients.
However, at the end of the year, Crédit Suisse still wasn’t ready to accept responsibility for its actions. Its American CEO, other senior executives, and their legal councel were invited to testify on February 26, 2014 at a Senate Subcommittee on Investigations hearing on Offshore Tax Evasion.
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On May 19, a guilty plea was announced with a $2.6 billion penalty. A system for Swiss banks to report on their US clients was rolled out with 106 financial institutions already subscribing. The Foreign Account Tax Compliance Act, passed in 2010, was ready to go into effect on July 1.
There was just one thing left to do. Senator Bob Menendez who chairs the Foreign Relations Committee brought the treaty to the Senate floor for ratification. He asked for the customary unanimous consent.
Senator Rand Paul objected. Only one Senator can block a vote. The treaty would allow Switzerland to provide information about its US account holders to the IRS, a privacy rights violation, according to Paul. That would make him more Swiss than the Swiss. He's not defending the rights of every American, as he said here. He's defending the rights of the 1% minority who do their banking in Switzerland for a reason.
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If Income Inequality really meant anything, Rand Paul would have to explain his tone deafness. Recognize his stand in favor of the privacy rights of the Swiss Bank Account crowd for what it is. Notice how he weaves in the language of suspicionless dragnet surveillance. He's not objecting to the reporting of all income to the IRS. It's only dragnet surveillance when the income of the privileged few is reported. It's uncanny how much he sounds like Marine Le Pen when he masks regressive ideology in progressive terminology. Rand Paul is running for President as much as any of the other presumed candidates, but nobody's talking about him every day. He benefits from the inattention. The corporate media in France looked the other way for Le Pen, too.
Rand Paul deserves to be chewed up relentlessly as much as anyone. Let's remember who he thinks is worthy of his protection.
I'd expect a lot of public interest in the administration's assault on tax havens. There could be red meat here for Democrats but the leadership isn't nourishing the base. Were the investigation, the Senate hearing, the negotiations with Switzerland just a charade?
On Friday I called Sen. Levin's office and spoke to a staffer. What's happening next with the Swiss tax treaty after all of Levin's fire-breathing at the hearing? Now that Rand Paul placed a hold on it, what's next? Maybe my question was unexpected. The staffer was unsure at first, but she finally landed on an answer. The treaty isn't in his portfolio. I had to question that because it sure seemed like it was in his portfolio on February 26 at the hearing. I was told that the treaty would be in the Majority Leader's hands now and that I should inquire with him if it's something I feel strongly about.
The staffer at Reid's office gave me the feeling I was asking for classified information. I changed the subject to focus on the Senate's parliamentary rules. If a unanimous consent request is met with an objection, how can a bill be routed to a vote? A two-thirds majority was the staffer's reply. And I might be able to learn more about the status of the tax treaty at Bob Menendez's office. He's the Foreign Relations Committee chair and he'd have to report it out from there. Right.
There was no human answering the phone when I called Menendez's office. I'll call all 100 Senators if needed. Smile and dial.
The one best thing that anyone can do in the situation we have today is turn off the corporate media, especially television news. They're deliberately pointing you in the wrong direction.
Rand Paul's letter to Harry Reid regarding tax treaties