Monday, Aug. 24, 2009 | 2:07 a.m.
The Obama administration, in a departure from previous administrations, has been aggressive in going after Americans hiding their wealth in secret offshore accounts so they can avoid paying U.S. taxes.
This new approach is welcome and is paying dividends: On Wednesday the Justice Department and the Internal Revenue Service announced they had struck a deal with Switzerland’s government. Switzerland is expected to turn over the names of suspected American tax dodgers who hold 4,450 secret accounts with UBS, one of the world’s largest banks.
The agreement ends a standoff between the U.S. and Switzerland, whose banking secrecy laws have thwarted the U.S. from going after tax dodgers there.
Originally, the U.S. had been trying to get UBS to release the names of those holding 52,000 UBS accounts; it was believed their accounts amounted to $18 billion. In turn, the Swiss government claimed that turning over such information would violate its sovereignty. But this wasn’t about lofty claims of “sovereignty.” The reality was that if Swiss banks were forced to hand over everything, tax cheats would withdraw their money en masse from Swiss banks, a pillar of that country’s economy.
The U.S. government isn’t getting as much information as it initially wanted, which enables the Swiss government to save face, but it is a breakthrough nonetheless.
There are reports that those holding accounts with UBS are withdrawing their money and taking advantage of a leniency program that the IRS set up, allowing those with offshore accounts to come forward to the IRS in exchange for lessened penalties.
It’s also significant that IRS Commissioner Douglas Shulman said the Swiss government is working with the IRS on requests for disclosing the names of those holding accounts at other banks where tax cheating is suspected.
It’s about time.