Friday, July 18, 2008

UBS Offshore Accounts Closed To US Clients

Having talked yesterday about Swiss banks needing to extricate themselves from 'unfriendly jurisdictions' and consolidate back here in the shadow of the Alps, UBS has announced that is to stop providing offshore banking services to American Citizens.

The offshore banking business has already been closed but they have gone a step further and have said that it will now not allow bankers from Switzerland or elsewhere in the world travel to the US to meet clients on banking matters or securities transactions

That decision follows an earlier ruling by a Florida judge to give the IRS permission to serve legal papers on the bank to attempt to force it to hand over the names of up to 20,000 US clients.

Mark Branson, UBS Global Wealth Management's chief financial officer, yesterday revealed the change of tack during a US Senate hearing on the issue of tax avoidance. He said that while UBS is winding down its offshore business for US citizens, there will be "no new accounts opened".

It looks like the writing is on the wall for Swiss banks in the US. If UBS cannot deal with the legal issues then who can?

It does bring up the interesting issue of others providing offshore services to the US. I did a Google on "Offshore Tax Shelters For US Clients" and the list came to 104,000 pages. Wouldn't want to own one of those businesses....

Another thing to consider is that the news coming from the US is that some of the rules on 'assisting US citizens to avoid tax' are looking to be retrospective. This holds up the frightening prospect of advisors in the US being hauled up to court for advising clients on tax avoidance, legally, but now, with the rule changes it will have been illegal.

Tell me how that will work?

I have made no secret on this blog of the fact that I am not particularly enamored by some of the under hand tactics being used by tax authorities all over the world, from the Germans bribing bankers to the US arresting them. I think it is becoming a sinister plot to castrate the tax efficient structures that people put in place to protect their assets.

Of course, I am aware of the need for citizens of a country to pay tax proportionate to their earnings, but is it any surprise when stealth taxes take their toll?

I posted on the blog some time ago a calculation on how much tax is paid on £100 spent on goods and services. This was when oil was at $60 per barrel. If you are a higher rate tax payer in the UK and you spend the £100 on a range of mundane weekly items you will be paying (with oil at $60 remember) £77 in direct and indirect taxes. That means for every £100 you spend you were only getting £23 in goods and services....

Can you blame people for seeking to protect some of their wealth from the tax man?

This issue of retrospection also throws up all sorts of problems for those seeking to structure their taxes efficiently. What you do today could be illegal tomorrow... surely that is against some fundamental principals of law?

I was going to go on to say that we can all do something about it at election time, but the thing is, with politicians spouting populist rhetoric it would be easy to put up a picture of a billionaire private equity fund guy and hoodwink the general public into voting for the most heinous of restrictions on protecting your wealth.

Come back Maggie and Ron, you knew the value of wealth creators and saved the world... this current crew are leading us down the path to oblivion.


Anonymous said...

And some of the fallout from this practice is that legitimate expats who are US citizens seem to be unable to find dependable online offshore brokerage services.

Asset Manager said...

This is a very good point but does, in some way, prove my point and that is that the IRS and other US agencies are set on making sure that even legitimate account holders have their accounts held in the US.

Some would call it protectionism... me... I couldn't possibly comment..