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Wednesday, July 25, 2012

Ordinary Swiss Bank Accounts

Earlier this year the American Senator Carl Levin (Democrat from the state of Michigan) grandly announced in support of his war against tax evasion that, "There is no such thing as an ordinary Swiss bank account."

When I first heard that statement, my first reaction was to start howling with laughter.  So, Mr. Levin, you're saying that there is nothing ordinary about those checking and savings accounts in Swiss banks that the Swiss use to pay rent, buy food or even pay their children's tuition at those over-priced American universities?

I had no idea.

If that statement weren't silly enough, Mr. Levin decided to be generous and allowed that there were perhaps a few Americans living in Switzerland who might need one of these not so ordinary accounts at a Swiss bank.  He implied that this might be OK with him since it was clearly an exceptional situation.

Those Swiss sending their children to American universities might want to rethink that choice since Senator Levin is the product of one (Harvard) and it's not pretty. Either he doesn't know the meaning of the English term "a few" (more than one but indefinitely small in number) or he never bothered to find out just how many Americans actually reside in Switzerland and really believes they number in the single (maybe double) digits.  A quick (under one minute) search of the Net reveals 1.6 million Americans in Europe and an estimated 30,000 U.S. citizens in Switzerland.

Context is everything, and to be fair to Senator Levin his primary target was American homelanders (U.S. citizens actually living in the U.S. like Madame Romney) who he thinks have Swiss bank accounts exclusively for the purpose of evading taxes or other nefarious purposes.  There can be no other reason, in his view, for the existence of these accounts:  they simply are not and never will be "ordinary" and the onus is on any American who has one to prove his or her innocence.

Levin's crusade is something that the average person in most countries would probably consider a worthy cause.  I certainly thought so.  But is it?  Does the mere fact that a person living in the U.S. (or any other country) has a Swiss bank account mean that he or she is clearly engaged in something very suspicious if not downright illegal?  As I examined my own feelings on this matter I came to the uncomfortable conclusion that my rather smug certainty that these people were up to no good was really an uninformed prejudice.  The cold hard truth is that I have no idea who these account holders are, much less what their intentions were when they opened these accounts in the first place.

Yes, it is reported that around 33,000 of them came forward to the IRS under the various amnesty programs in the past few years but we have no specific information about who they are or what they actually owed in taxes versus penalties for simply not having reported the accounts - the latter being a rather common problem these days as Americans and Green Card holders at home and abroad wake up to the fact that there is a lovely little form called an FBAR that they should have been filing all along (five years of un-filed FBAR's equals a penalty of $50,000 USD) even if they owed no taxes at all.  How many of these people were actual criminals engaged in tax evasion and how many were simply ignorant and entered these programs because they were ill-advised, thought they were doing the right thing, and then found themselves in a kafkaesque nightmare with few options and astronomical sums owed?  We'll probably never know unless some curious (and very brave) journalist decides to look into it.

Here is one thing we do know about those amnesty programs (like the OVDP - Offshore Voluntary Disclosure Program):  there are legitimate questions about whether or not these programs were conducted properly and respected the rights of those who chose to participate.  In her 2012 report, the head of the Taxpayer Advocate Service (a watchdog agency designed to oversee IRS activities and to ensure that all U.S. taxpayers are treated fairly) Nina Olsen condemned the IRS for its "bait and switch" tactics used against those who did come forward and said that the IRS had seriously damaged both its credibility and its ultimate goal which was to bring non-compliant taxpayers back into the U.S. tax system.  These are serious allegations and merit a serious response though none has been forthcoming from the U.S. government.

For those who would like this to be a simple morality tale of the "good" (citizens who never do business overseas, never invest outside their home countries, and who only rarely leave their countries of origin to live very temporarily abroad) versus the "evil" (citizens under suspicion for having done any one of these things) these inconvenient questions do muddy the waters.  That I have raised them here will undoubtedly lead some to accuse me of coddling the unpatriotic and the selfish.

Here's what makes me suspicious:  a rush to judgement, certainty in the rightness of one's cause, a refusal to even consider facts that conflict with the standard story, and a "guilty until proven innocent" mentality.  There is something deeply disturbing about the sheer hubris of those who pretend to know (based on little or no empirical evidence) the intentions and thinking of people they have never met and know next to nothing about.

To condemn someone simply on the basis of one piece of information (a Swiss or any other overseas bank account) says very little about that person and a whole lot about us.  From what dark place in our hearts do we pull out this Pavlovian response that insists that there must be something evil and nefarious going on here?  It's worth looking deeply into our own consciences to find an answer.  We cannot know precisely what is going on in someone else's head but we can try to know ourselves.  This is not a complete cure for what ails us - a close encounter with our shadow side in and of itself will not necessarily make us better people - but it just might shame us into looking a little harder at our own motives.  That in turn might lead to more intellectual honesty and other qualities in short supply these days:  empathy and a willingness to listen to the other person's story.


Anonymous said...

I sure do sleep better now that I've renounced my U.S. citizenship, I was fully compliant with FBAR and also paid my expatriation tax to fully complete the exit process.

I would advise any U.S. citizens/persons living outside the U.S. to rid themselves of this horrible linkage to a country that only sees you as a criminal for not living in the homeland.

Renounce now while you still can, they may just defund the department that processes the certificate of loss of nationality at some point and you'll be stuck with whatever new regulations/compliance they create.

Victoria FERAUGE said...

@anonymous, I'm hearing this kind of thing a lot lately. One of the extraordinary things that has come out of the Diaspora Tax War of 2012 is the sheer number of U.S. renunciants coming out and telling their stories. The sky did not fall in for these folks and I've heard very few regrets. On the contrary many speak opening of their relief and of their deep appreciation for their new countries of citizenship.

This is powerful stuff and I personally think it is having an impact. I think I will post on this soon - it is a phenomenon that is very new but very influential as Americans abroad evaluate their options.