The Swiss court has placed a serious barrier into the wedge that had opened on Swiss banking privacy with the agreement US agreement on UBS release of information on thousands of US accountholders. The court has ruled that failing to file required returns or failing to report income is tax evasion and not tax fraud and so not subject to sharing of information under Swiss law. US-UBS Deal is Undermined by Swiss Ruling, Bloomberg, Feb. 26, 2010 (New York Times).
That distinction between tax evasion and fraud has always been equivalent to a razor splitting a hair--in a tax system that depends on self-reporting of income, intentionally failing to report income is about as good a way to deceive the government about how much you owe in taxes as you can find.
What's the solution on this one? Perhaps, as the NYTimes article notes, turning the contractual agreement into a binding obligation similar to a treaty between the U.S. and the Swiss. If the Swiss have any integrity on this issue, they'll agree to do so. The Swiss Parliament could act fairly quickly and take the wind out of the defiant noncompliant US nontaxpayers who at this point think they have successfully defrauded the US of taxes owed and shifted the burden onto all of us who try to comply with the tax requirements.
Meanwhile, in Ann. 2010-16, the IRS continued to suspend the obligation to file a FBAR (a formal report on foreign bank accounts) for those who are not US citizens or residents or domestic entites . And Notice 2010-23 provides FBAR filing relief for some who own conmingled funds and some others.
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