A former senior manager at UBS, Raoul Weil, once headed the bank's Global Wealth Management Business, where he allegedly helped some 17,000 Americans avoid paying U.S. taxes on more than $20 billion by illegally sheltering their money in secret Swiss accounts. In federal court today, Weil pleaded not guilty to tax fraud conspiracy.
Though originally indicted in 2008, Weil managed to elude U.S. authorities until October of last year, when Interpol picked him up while vacationing with his family in Bologna, Italy. He was extradited to the U.S. last month. If convicted, Weil could face up to 5 years behind bars.
More broadly, last summer U.S. and Swiss authorities negotiated a deal requiring Swiss banks to provide the U.S. with detailed information about its American clientele.
The agreement will allow Swiss banks to settle any potential U.S. charges if they disclose extensive information about their American clients, the value of their accounts and any help they received from tax professionals.
Those settlements would include penalties for Swiss banks that helped their U.S. customers avoid taxes, according to a senior Justice Department official.
The total penalties could top $1 billion, the official said. The department could also use the information to prosecute Americans for tax evasion.
Under an amnesty program which expired just days ago, some 40,000 Americans with secret Swiss accounts came forward to U.S. authorities (thus avoiding what could have otherwise been a lengthy prison sentence). In exchange, some $5 billion dollars in backed taxes were paid.
While it is certainly nice to see the U.S. finally go after chronic tax evaders, the much larger issue of tax reform remains unresolved. For instance, under current U.S. law, it is perfectly legal for American based companies to keep their overseas profits, overseas (thus avoiding U.S. taxes on their profits). In 2013, The Wall Street Journal analyzed 60 of the country's largest companies and found that in the previous year alone, these 60 companies avoided paying taxes on more than $160 billion in profits (which at a 40% tax rate would have amounted to around $65 billion in tax revenues). These are staggering figures, and come at a time when even The Wall Street Journal admits U.S. companies are enjoying "record profits." More worryingly, the practice of parking overseas profits, overseas, appears to be growing among U.S. companies, as this amount has grown each year.
The U.S. desperately needs this tax money, yet this damaging practice will only stop once we reform our tax code. We could start by reducing our corporate tax rate so that it is in-line with our European counterparts, in exchange for removing the many loopholes which allow multinational corporations to shield such vast profits in the first place.