The UBS Case: Big Brother has friends. And they talk…
By now you’ve probably heard about the U.S. Government’s high profile victory in overcoming Swiss bank secrecy laws — at least partially — to obtain account information for wealthy Americans with offshore bank accounts that were presumptively used to evade U.S. tax. While the IRS and DOJ personnel should be lauded for their dogged determination and perseverance in this matter, many important questions remain unanswered. Chief among these questions is whether this case will be an aberration or whether it will usher in a new degree of cooperation among governments aimed at thwarting unscrupulous banking practices, tax evasion, and other narishkeit.
While the jury is still out on this matter (sorry, just couldn’t help myself), anecdotal evidence seems to suggest that if the IRS has its way the trend will be toward greater information sharing among the G20 tax authorities. So what, you ask? Well, think about this: IRS Commissioner Schulman is working diligently with the Leeds Castle Group to promote coordinated examinations of multinationals. If the IRS is successful in its bid to promote cooperation among the tax authorities of major U.S. trading partners, one of the likely outcomes will be increased scrutiny of cross-border planning and transactions, especially transfer pricing. Consequently, documentation of cross-border planning will need to be consistent among jurisdictions and will need to align more closely with business operations. Otherwise, there will be significant enterprise risk. While it remains to be seen if the IRS will be successful in its endeavors, early indications show that they likely have the momentum to succeed. If the global economy continues to contract, it seems probable that cooperation will increase among tax authorities if for no other reason than resource constraints. However, it’s not likely to take them long to conclude that, working collaboratively, taxpayer information can be leveraged across multiple jurisdictions to reduce the amount of time and effort required to audit a multinational enterprise. Only time will tell whether the cooperation seen in the UBS Case is an aberration or a paradigm shift.
- RBJ
Tags: Information Sharing, IRS, Tax Audits, UBS