What Is a Swiss Bank without Bank Secrecy? And Does Anyone Tell New Citizens About US Worldwide Taxation Rules?
Lite-blogging Ken notes the front page WSJ story today, “Swiss Banks Freeze Out US Clients,” July 21, 2009. The freeze-out is a response to UBS and its fight with the IRS, which wants information on US taxpayers (not necessarily just citizens). I have two questions, neither of which I will try to answer:
First, what is the competitive advantage of a Swiss bank these days, if bank secrecy is gone? If it is no longer possible for people around the world privately to stash cash in Switzerland, sure, there is still an advantage in having a safe haven bank. Coup de main, coup d’etat, revolution, hyperinflation … But there are lots of safe haven banks around, and mostly they are located in places like the US and the UK and France and other large, stable states. Bank secrecy has always been what has set Swiss banks apart, yes? What is the competitive advantage in relation to other safe havens if that is gone? I don’t doubt the probity and skill of Swiss private bankers; I just doubt it is any greater than other private banks.
Second – perhaps tax blogger extraordinaire Paul Caron can address this? Paul,might I solicit a comment or cross-guest-post? – what about the tax obligations that fall upon people who avail themselves of the opportunity to become US persons for tax purposes – US citizens but also, I take it, not just citizens but permanent residents in the US. What are the US rules regarding world wide income taxation? The IRS investigation has focused on US citizens apparently holding secret Swiss accounts that should be subject to US tax rules, regardless of it being offshore. What this made me wonder is whether anyone advises new, or would be, US citizens in advance of what their full tax-paying obligations might be. As US rates look to rise, and rise, compared even to Europe and other jurisdictions, does US citizenship or US person for tax purposes look so attractive?