On January 9th the US Internal Revenue Service (IRS) announced that it has initiated another Offshore Voluntary Disclosure (OVD) program for taxpayers to declare their hidden offshore assets in exchange for lowered penalties.

The new program started on the day of the announcement, and will continue indefinitely. Taxpayers making use of the OVD will be required to reveal detailed information regarding their previously undisclosed assets and capitals hidden in offshore bank accounts.

In exchange for revealing the information, taxpayers will avoid the possibility of criminal prosecution, and will face a penalty rate of 27.5 percent of the highest amount held in the bank account during the last 8 years. Additionally, participants will be required to pay all back taxes owing and any applicable interest charges. Under current US tax regulations, the penalty rate levied by the IRS may be as high as 150 percent.

Individuals whose undisclosed assets and capitals did not exceed a maximum value USD 75 000 in the last 8 years can be qualified for a reduced rate of 12.5 percent.

According to the Commissioner of the IRS Doug Shulman, the last two OVDs have already netted over USDD 4.4 billion in recovered tax revenues and penalty fees, and the collections are expected to increase as investigations continue into taxpayers who came forward in the 2011 program. The last two disclosure programs saw over 33,000 US taxpayers come forward with details on their offshore bank accounts.

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On November 8th, Swiss media revealed that Credit Suisse has sent out letters to a number of its American clients, stating that the bank will cooperate with US demands to release data of a number of US taxpayers with Swiss bank accounts.

The letters, which are reportedly dated November 2nd, indicated that the bank will disclose the names and bank details of clients who are under suspicion by US tax authorities of evading their US based tax obligations through undisclosed bank accounts with Credit Suisse. The clients in question would have held bank accounts in Switzerland at any time between the end of 2002 and the start of 2011. The bank has so far refused to reveal how many American clients have been sent the letter.

According to instructions contained in the correspondence, the holders of the bank accounts may now agree to the action, or contest the disclosure through legal action in Switzerland. However, US based tax analysts have said that protesting the act would ultimately prove to be ineffective, as bringing the proceedings to court would effectively reveal the identity of the bank account holder.

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In a statement made by representatives of Credit Suisse on September 19th in Dusseldorf, the bank announced that a solution has been reached to the ongoing animosity with German tax authorities. The disputes centered on accusations that Credit Suisse staff knowingly aided German taxpayers in evading their tax obligations in Germany through the use of Credit Suisse bank accounts.

The deal will see Credit Suisse pay EUR 150 million to German tax authorities to end their investigations. German authorities have agreed that they will also stop investigations and prosecution of individual employees of Credit Suisse. As part of the agreement, the bank will not make any admission of responsibility for tax evasion by German taxpayers who used Credit Suisse accounts to hide their funds.

According to the bank’s statement, the deal with German tax authorities avoids a complex and prolonged legal dispute, and provides customers and investors with assurances of legal certainty.

Credit Suisse has been under investigation by German authorizes since last year, when tax officials launched a probe into 1100 Credit Suisse clients who were suspected by German authorities in tax evasion. The bank is currently facing the prospects of investigations for similar charges by tax authorities of the USA.

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In a statement made on September 15th the US Internal Revenue Service (IRS) said that the Offshore Voluntary Disclosure Initiative (OVDI) was a successful operation in the continued fight of the IRS against international tax evasion. The Initiative, which ran from February 2011 to September 9th, has already resulted in USD 500 million in taxes and interest payments being paid by participants. The payments are expected to rise even further in the coming months as the IRS finalizes and charges all applicable penalties on the unpaid taxes.

Commenting on the results of the OVDI the IRS Commissioner Doug Shulman pointed out that the goal for the program was not just to raise tax revenues but also to decrease the occurrence of tax evasion. He added, “…Americans now understand that if they try to hide assets overseas, the chances of being caught continue to increase.” Since the start of 2009 the IRS has collected over USD 2.7 billion from disclosures made during OVDI programs.

The 2011 OVDI allowed taxpayers to disclose their offshore incomes and assets, in exchange for lowered penalties and some protection from ensuing criminal prosecution. The penalty rate incurred for funds held in previously undisclosed bank accounts was capped at 25 percent of the highest balance on the account. Taxpayers are also liable to pay all back taxes and late fees owing on the undisclosed incomes for the last eight years.

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The president of the Swiss Bankers Association Patrick Odier has revealed that Swiss and UK tax authorities are only a few weeks away from concluding negotiations over a new cooperative tax deal.

Under proposals raised in the negotiations, Swiss banks would be responsible for applying a flat rate withholding tax on gains made on capitals and savings on bank accounts held by UK nationals. The tax would be charged at a rate set to match the UK’s domestic tax obligations. In order to maintain Switzerland’s vaunted bank confidentiality rules, Swiss banks will transfer the full amount of the tax payment without disclosing the identity of their UK clients.

News of the agreement’s progress comes hot on the heels of the recent announcement that German and Swiss tax authorities have already completed negotiations on their tax agreement, which will make Swiss banks responsible for collecting appropriate tax payments from their clients in the future.

The progress made in the tax deal is thought to be a positive signal for other European nations. In particular, France and Italy have both previously displayed great interest in reaching a similar productive tax agreement with Switzerland.

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