Federal Tax Crimes: Swiss Legislation to Forego Notice to Foreign Depo...

Federal Tax Crimes: Swiss Legislation to Forego Notice to Foreign Depo...: Readers of this blog might be interested in a recent blog by Virginia Le Torre Jeker, a practitioner representing expats from the U.S. and f...Readers of this blog might be interested in a recent blog by Virginia Le Torre Jeker, a practitioner representing expats from the U.S. and foreign persons regarding U.S. tax laws.  The blog is Swiss Account Holders – Losing the Right to be Informed About IRS Disclosure (Angloinfo 3/24/14), here.  The article discusses Swiss legislation that will permit Swiss tax authority to "turn over information to foreign governments on certain account holders with undeclared accounts in Swiss financial institutions without providing the holders any advance notice of the disclosure."  She says:

Under the amended law, information about those suspected of tax evasion can be sent to another country without prior notification to the account holder, provided the country to which the information will be sent can prove that giving such advance notice would hinder the investigation. 

Of course, US depositors should not hit the panic button yet.  I have not studied the legislation and just respond to Ms. Jeker's description of the legislation.  I suspect that the Swiss will give a reticent interpretation of its authority -- meaning that it will require a significant, if not very strong, proof that notice would hinder the investigation.  Seemingly, this type of authority would not fit with group requests of the type that will constitute most of the requests, at least by the U.S.  And, it would require, seemingly, the identify of the individual, the nature of the investigation, and a persuasive statement of why disclosure might hinder the investigation.  So, I doubt that, even when there are individual requests, the requesting country -- thinking particularly of the U.S. -- will automatically claim disclosure would hinder an investigation.  But that remains to be seen.

The article discusses also the procedure, if a foreign depositor is notified, to invoke to block disclosure and the requirement of 18 USC 3506 that U.S. depositors notify the US Attorney General of a proceeding to block disclosure.  Of course, generally, filing a proceeding to block the disclosure is not a meaningful exercise in most cases -- both because of the requirement to notify the Attorney General and the probability that, although some have been successful in the past, I doubt that many, if any, will in the future.  But, notice can permit the U.S. depositor to take other remedial measures, such as most prominently OVDP.