A settlement providing the Internal Revenue Service access to the identities of Americans holding secret accounts at Swiss bank UBS is being viewed as a significant victory in the battle against bank secrecy.
Bank secrecy regulations have long made it difficult for the IRS to pursue tax evaders, especially in Switzerland — a situation documented in The Center for Public Integrity’s 2001 book, The Cheating of America. The book traced how wealthy individuals and corporations were able to evade taxes by moving their taxable income offshore.
In the book, the Center cited Switzerland as the ideal location for such shady financial dealings: “While Switzerland has an extradition treaty with the United States, tax evasion isn’t covered by it,” authors Chuck Lewis and Bill Allison explained. “Couple this with the nation’s bank secrecy laws, its numbered accounts, and its historical role as a tax haven, and Switzerland has long been a favored destination of fugitives from the IRS.”
The landmark settlement, however, could usher in a new era. It sets a precedent that potentially weakens secrecy laws, posing a threat to the offshore havens for tax evaders. Although the lasting effect of the case remains to be seen, we can likely expect a slew of indictments from the Justice Department and a crackdown on alleged tax cheats.