5,000 U.S. Tax Dodgers Will Be Revealed, Says Report

NEW YORK—A deal last week between Switzerland and the United States will lead to a global financial services company’s disclosure of about 5,000 U.S. secret Swiss account holders’ names, said weekly newspaper NZZ am Sonntag on Sunday.

The signature deal ended a dispute where the U.S. Internal Revenue Service (IRS)—the federal tax collection agency—had sued UBS (Union Bank of Switzerland) to unveil 52,000 U.S. offshore clients, who are believed to be tax dodgers.

NZZ am Sonntag said that the names of those to be unveiled would be those suspected of committing tax evasion under the terms of the double taxation agreement, which obliges Switzerland to provide assistance if Washington seeks it in a criminal investigation.

As the deal is based on this 1996 U.S.-Swiss agreement, there’s no required change to the Swiss law. Therefore, the Swiss Cabinet will be able to implement the deal directly without going through parliament. UBS will also get away with a fine, it said.

The U.S. government had taken a step back from the original demands of the IRS as the U.S. Treasury Secretary did not want to provoke another financial crisis by pushing UBS over the edge, according to NZZ am Sonntag.

Earlier in February, the world’s second biggest wealth manager paid $780 million in compensation to U.S. tax authorities and revealed around 300 clients to avoid criminal prosecution for those transactions.

The IRS long has had a policy that particular tax evaders who come forward before they are contacted by the agency usually are able to avoid jail time as long as they agree to pay back taxes, interest, and heavy penalties.

Since March, the IRS has launched a six-month amnesty program, which will reduce penalties for individuals with undeclared incomes, said IRS Commissioner Doug Shulman to CBS News in August.

Shulman would not unveil the overall figures of people who applied. Yet the IRS said to CBS News that 400 people applied to disclose undeclared assets in a single week in July, an enormous increase from fewer than 100 applications throughout 2008.

At the beginning of the summer, Shulman announced the production of a comprehensive set of recommendations from series of public forums by the end of 2009 to boost taxpayer compliance.

“This is the next important step in our open dialogue with interested parties in this effort,” Shulman said in a news release. “I’m very pleased with the quality of the feedback we’ve received so far. I’m confident these forums will ensure that all ideas are on the table when it’s time to form our recommendations.”

To prevent future occurrences, President Barack Obama, in his proposed 2010 budget, asked Congress to require financial institutions overseas to share more information with the IRS. He also requested Congress to pay for 800 more agents, examiners and lawyers to trace down people who are hiding money in offshore tax havens.

The economic downturn has brought governments to their knees. The United States has allocated enormous sums to overturn the economic downslide. Present tax revenues are insufficient to pay for what already has been apportioned and governments are scrambling to find new revenue sources.