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July 8, 2009 - Phil Hodgen

Nonshocking development–IRS vs. UBS is now USA vs. Switzerland

The U.S. government’s attempt to get the names of 52,000 American customers of UBS seems to be progressing normally. It has morphed from a pure litigation question (pending lawsuit in Florida) to a diplomatic spat. The Swiss government has stepped in and thrown down a diplomatic trump card.

In a New York Times article, the money quote:

“Switzerland makes it perfectly clear that Swiss law prohibits U.B.S. from complying with a possible order by the court in Miami to hand over the client information,” the Swiss Department of Justice and Police said Wednesday in a statement on its Web site, a day after it made a filing to the same effect in the U.S. District Court in Miami. Therefore, “all the necessary measures should be taken to prevent U.B.S. from handing over the information on the 52,000 account holders demanded in the U.S. civil proceeding,” it added.

The Swiss government will issue an order explicitly prohibiting U.B.S. from handing over client information “if circumstances require,” it said.

This game is not over. The U.S. has a few diplomatic trump cards it can throw as well. I will ignore the diplomatic issues (is this interference with Swiss internal matters, which the Swiss should properly refuse to accept?), ethical matters (is it “right” for the Swiss to do this?), and questions of outcome (who will win this battle of Godzilla vs. Mothra?).

I live in the world of humans. Humans with money in bank accounts in places like Switzerland. I care about what this means to them.

Comment to the 52,000 – if you successfully keep your identity shielded, it will only be as an unintended consequence of a politician’s negotiation, not because your privacy is important at all (to the Swiss). Similarly, if your identity remains shielded, it only means that a U.S. politician’s agenda meant that the tax dollars collectible from you are less important than other agendas being served.

Here’s my call: this is yet another reminder that your financial and personal affairs are of no concern whatsoever to any banker, bureaucrat, or politician. Do not rely on an individual’s assurance that “Everything is going to be OK.” Do not rely on your interpretation of another country’s privacy laws to assume “Everything is going to be OK.”

Choose simple, legal methods for holding and investing wealth. Keep it clean. Be nimble and ready to move fast if prudent.

Hat-tip: Federal Tax Crimes blog.

US Real Estate Investments Voluntary Disclosure