Offshore Accounts Investigations by IRS

Offshore Accounts a Risky Business

As reported by Reuters today, some of the rich clients of UBS are rolling over and trying to make good with the U.S tax authorities after the IRS cracked down and had a former UBS banker indicted.

The WSJ characterized it as a sign that the U.S. efforts to battle offshore tax evasion is having some effect.

Whether the tax authorities will ultimately be successful or not, lawyers are the winners so far. The UBS clients are hirin tax attornies and scramblin to cover their collective through the Internal Revenue Service (IRS) voluntary disclosure program which would give them amnesty.

The amnesty program allows U.S. citizens to avoid criminal prosecution if they acknowledge evasion and agree to pay taxes and penalties.

Recently U.S. and Swiss governmental authorities have increased discussions with UBS with the threat of releasing information on the holders of offshore accounts held by U.S. taxpayers.

It's thought that UBS had as many as 20k United States citizens utilizing their private banking services to minimize their taxes.

The IRS is pondering a bulk settlement that would speed up the process for former and current UBS clients to seek amnesty.

The settlement would likely be something like the 2003 landmark offshore credit-card and tax-fraud deal only leveling harsher punishment. The reason may be that the Swiss government could be excluded from any such deal where US citizens voluntarily came forward and gave up their bank secrecy by giving up their own private bank information.

The threshold in Switzerland which defines tax evasion fraud is more narrow than in the United States. As a result, the Swiss will not engage in exchanging account data with foreign authorities unless they can prove tax fraud.

U.S. authorities have requested UBS release information on thousands of offshore accounts at UBS in order to conduct their investigation.

What Now?

I've been a bit "out of pocket" recently, and haven't posted too much to this blog.

Longer-term, financially I see nothing that dramatically changes my thesis ("we're all doomed!") :)

In the short run, even though we hit new lows last week, we have a TON of people calling for a new "up leg" in the markets that could last 2-4 months (!) -- I'm not totally buying it yet.

Here is how I would recommend playing it:

I would only enter new positions if you're a crazy trader type.
If you've been stuck long in your 401k or whatever, use any bounce as a chance to get more defensive, but give it some weeks to play out and recover what you've been losing.
If you're short, and NOT leveraged you can ride it out, but beware, bear market rallies (times when the stock goes up even though it has been and will continue to go down) can be fast and furious -- being caught short with lots of leverage or an option contract that will expire to fast can be dangerous to your financial health.

Sorry for the macro look here, but i'm expecting to be very busy as i might be relocating here in the next few weeks and have lots of prep work to do -- like figuring out where we're gonna live (!)

UG

Zeitgeist

When you're an expat with spotty slingbox coverage you get some extra time to tune into the "fringe" element on the internet.

I've probably seen every youtube/googlevideo conspiracy nutjob video on the planet -- along with some really good educational stuff.

Well, the last couple of days my slingbox was fritzing again so i was cut off from enjoying my "dancing with the 70's tv stars after extreme makeovers" reruns and i got to watch Zeitgeist.

Zeitgeist (2hrs ish) and the addendum (another 2 hours) is a total and complete tour de force.

If you've seen or read aaron russo, the illegality of the fed and the federal income tax, the nutjob from austin who heckles the bilderburg people, loose change, money as debt, this wraps everything up in a relatively neat ball and serves it up. freakin' brilliant. makes oliver stone look pretty hackish in comparison -- of course there is no joe pesci in this -- so oliver has that going for him.

anyways, the 1st version is here:

http://video.google.com/videoplay?docid=-594683847743189197

and the "addendum" can be found here:

http://video.google.com/videoplay?docid=7065205277695921912

if there are any criticisms i can level it is this:

a little too much crap at the front end of both that might disuade the casual viewer...give each of them 10 minutes to get started (or fast forward if you have to).

and, the second part of the addendum is a little too focused on some group offering the "solution" to all this with some real crack smoke ideas about society without profit motive being enabled by "technology" if we'd just stop manufacturing scarcity where everyone is freed up to do deep thinking and (i guess) nearly all crime melts away as an evil learned behaviour and not something inherent in man. apparently we'll all be living in space agy houses that look vaguely like the sydney opera house as well and scooting around on floating train tracks that i guess were made for the good of man by fellow men with no profit motive and no state intervention (?)

anyways. that aside, the other 3:00 hours is just simply outstanding. there are even some useful nuggets in the last hour although the pie in the skyers were a little short on substantive details to be taken too seriously (by me).

enjoy!
UG