You might recall the story that broke a week or so ago about whistleblower Bradley Birkenfeld being awarded $104 million dollars by the IRS. This is directly related to the reason Mitt Romney won’t release his 2009 tax returns. Let me explain…
Bradley Birkenfeld was a private banker at UBS in Geneva, Switzerland, where many very wealthy Americans hid millions of US dollars as a way to avoid paying taxes. It was his job to lure those wealthy Americans to use his bank as a tax haven.
In 2007, Birkenfeld decided to take advantage of a new whistleblower law that offered informants up to 30% of the tax revenue they help the IRS recoup, so he turned informant.
Although the US has a horrible record of prosecuting whistleblowers (Birkenfeld just finished serving almost three years of a 40-month sentence after pleading guilty to conspiracy to defraud the United States), he will collect over a million dollars for blowing the whistle on UBS’ activities.
As a result of Birkenfeld’s information, UBS payed $780 million to avoid criminal prosecution and agreed to identify 4,450 of its U.S. clients sought by the IRS for allegedly hiding assets abroad illegally in order to avoid U.S. tax penalties.
I’m certainly no expert on international banking and offshore tax havens, so I turned to the Find Law blog for the facts on what went down:
Acting as an intermediary of sorts, the Swiss government agreed, under a written agreement with the U.S. to respond to treaty requests concerning tax information on UBS clients, by transmitting such requests to the Swiss bank, and ordering UBS to comply with the request covered under the countries’ tax treaty.
Other Swiss banks doing business in the United States should not rest easy, however. The agreement says that the Swiss Government agreed to review and process additional requests from U.S. tax authorities for information from other banks about their U.S. clients.While the IRS agreed to institute a Voluntary Disclosure Program for U.S.-based holders of Swiss bank accounts having them pay just 20% of the amount of their federal taxes that were underpaid for the past six years, and 20% of the highest value of the account over the past six years — in addition to all their unpaid taxes and interest due on those taxes — not all U.S.-based UBS clients with Swiss banks accounts will be eligible to benefit from this program.
Romney’s family assets at that time included a Swiss bank account with UBS — an account that was noted simply as a “money market” account on the 2007 disclosure form he filed with the Federal Election Commission without any mention that the account was in Switzerland. As a result of the UBS whistleblower’s revelations, many questions have been raised about why Romney had a Swiss bank account — whether it was properly disclosed to the Internal Revenue Service and whether it was used to evade U.S. taxes. …
U.S. citizens who failed to include income from their Swiss accounts on their returns or who failed to file the Report of Foreign Bank and Financial Accounts (“FBAR”) faced a choice: Either roll the dice on getting prosecuted, or take advantage of the IRS’ partial amnesty program (the so-called “Offshore Voluntary Disclosure Program”) to disclose previously unreported accounts and pay up. Thus far, $5 billion has been collected under the IRS voluntary disclosure program, and numerous individuals have been prosecuted.
Romney’s UBS account in Switzerland, which held millions of dollars, was closed in 2010, according to the lawyer who manages Romney’s blind trust. For various periods starting in 2009, the IRS offered reduced civil penalties and a diminished risk of criminal prosecution to those who voluntarily disclosed off-shore accounts that hadn’t previously been reported to the IRS.
Romney has not released any FBAR forms or said whether he reported the Swiss account to the IRS during its active years.
At Counterpunch, Dave Lindorff posits
The nagging question though is why he hasn’t just responded to the demand that he release two years of tax returns like John McCain did in 2008 by simply releasing his 2009 tax filing, along with the 2010 return he already released?
The answer may well be that 2009 was the year that the Treasury Department decided to offer an amnesty from prosecution for tax fraud to any of the tens of thousands of millionaires who were known or suspected to have illegally hidden income abroad in the Cayman Islands or in Swiss banks — a felony, but one that people thought they’d never be caught at.