Sunday, November 2, 2008

Will Tax Be A New "In" Crime & What Are the International Implications

The Washington Post article by David S. Hilzenrath titled, IRS, Justice Target Undisclosed Assets in Swiss Accounts raises the question of whether the veil will be further lifted over bank accounts held in Switzerland, and will there be prosecutions in the U.S. for individuals who placed funds abroad in efforts to evade U.S. taxation?  This remains to be seen, although Mr. Hilzenrath provides information on current happenings.

An interesting question can arise when DOJ tries to secure information that might result in a violation of foreign law if the information is provided to DOJ. In the past courts have been split on whether the production of documents should be permitted when there is a possible violation of the secrecy laws of another country. The Restatement (Third) of Foreign Relations Law of the United States section 442(1)(c) provides:

"In deciding whether to issue an order directing production of information located abroad, and in framing such an order, a court or agency in the United States should take into account the importance to the investigation or litigation of the documents or other information requested; the degree of specificity of the request; whether the information originated in the United States; the availability of alternative means of securing the information; and the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located. (emphasis added).

One Fifth Amendment case DOJ is likely to cite to is United States v. Balsys, 524 U.S. 666 (1998).  There may also be questions as to whether operations in the U.S. make a difference. The Permanent Subcommittee on Investigations Report on Tax Haven Banks Hiding Billions From IRS can be found here. UBS continues to be in the news. (See previously from June 08, Linnley Browning, NYTimes, Wealthy Americans Under Scrutiny in UBS Case ). 

(esp)(w/ a hat tip to Mark Johnson)

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