As I was having lunch yesterday, I was speaking with a coworker and he began to tell me about a
story he watched on 60 Minutes from CBS. It was the story of Bradley Birkenfeld, a Swiss banker who is an American and who had came forward to the Justice Department. It turns out he was the one who “spilled the beans” on Swiss banking giant, UBS. As I do not have a television, I went to the 60 Minutes website as soon as I could and read the story in question. When I was home for the day, I was able to watch the video CBS has posted online and I must say, I was intrigued.
Most of us probably have some fleeting knowledge of the secrecy surrounding Swiss banks and how hard it is for outsiders to penetrate that secrecy. That is doubly true for those officials who are looking for tax evaders. I say fleeting because it may still be unknown just how far Swiss banking officials will go to do the bidding of their clients. For many years, these banks have been the holding places for much wealth and a lot of that wealth has been ill-gotten gain. Dictators and criminals alike have use the secrecy of the Swiss banks to hide their wealth and it seems there is a new breed of client for the banks in Switzerland; the wealthy American taxpayer who does not want to pay their taxes.
Bradley Birkenfeld was based in Geneva, Switzerland and for the first time in history, he tells of some of the practices used by UBS to hide the money of wealthy Americans. The clients of the banks were directed to service providers, who would set up layer after layer of shell companies to hide where the money was coming from. As a mid-level banker with UBS, Birkenfeld actively managed the money of his clients, even to the point of making purchases for them. I found the story of the diamonds to be especially interesting, in an exchange with Steve Kroft, of 60 Minutes.
One example he told us about involved withdrawing cash from a customer’s account, buying some diamonds in Geneva and then smuggling them into the U.S. for the client inside a toothpaste tube.
Birkenfeld claimed it was legal because the diamonds he said were worth less than $10,000 and didn’t have to be declared at customs.
“If it was legal why did you put them in a toothpaste tube? I’m having trouble with that,” Kroft said.
“Oh, it was just a way of carrying them so I wouldn’t lose them. Where would you put two diamonds?” Birkenfeld replied.
“I think I’d put them in a money belt or I think I’d put them in a case,” Kroft said.
“It was a one-time event. That’s not my business. I just put them in a toothpaste tube,” Birkenfeld replied.
He told Kroft he wasn’t trying to hide the diamonds from U.S. Customs. “Not at all,” Birkenfeld said.
Buying diamonds and other valuables is just one way of hiding and transporting assets, and Birkenfeld insists that he was just providing a service to his clients, which is what Swiss banking is all about.
Birkenfeld may not want to admit it, but he had to have known he was involved in an illegal activity with the purchasing of the diamonds and smuggling them into the United States. I can not see how that fact can be escaped. If you have not watched the story from 60 Minutes, take a few minutes and do so. I think you may find it as interesting as I did. It is worthy to note that Birkenfeld may be the only one who goes to jail because of his whistleblowing. Read the entire story from 60 Minutes for more details.
The entire scenario involving Swiss banks and American wealth brings up a very valid point about America and our system of taxation. Most of us may have the same response as my brother when I first mentioned writing this article to him. He said he didn’t blame those rich Americans who were taking their money to Switzerland because their taxes were too high. There may be a certain degree of truth in that statement, but there are two sides to the story.
First of all, there will be claims by some that these wealthy Americans are just plain greedy, that they do not want to share their money with others. To that I say it is their money and as long as the wealth has been achieved legally, they can use it how they see fit. That does not however, remove their responsibility to pay the taxes on said money. The last time I checked, that is the law. On the other hand, one has to wonder at a system of taxation that drives such a large amount of money out of America.
There is no doubt that most of the American money that resides in Swiss banks is there for one purpose; that is to hide it from the Internal Revenue Service.
Asked what he thinks is the most valuable thing he gave to the U.S. government, Birkenfeld told Kroft, “The amount of clients and the amount of assets managed by UBS in the United States out of Switzerland.”
“And that was how much?” Kroft asked.
“That was 19,000 clients and around 20 billion Swiss francs, which is about $19 billion,” Birkenfeld replied.
“Of the percentage of American accounts that you represented, how many would you say were trying to evade taxes?” Kroft asked.
“My own clients?” Birkenfeld replied. “I would say about 90 percent.”
Asked if people told him this was their intention when they opened their accounts, Birkenfeld told Kroft, “It was the unwritten rule. You didn’t have to discuss it. People wouldn’t fly all the way to Switzerland to open accounts just because they wanted to declare their money.”
No matter how you describe it, $19 billion is a lot of tax dollars that may never see the shores of America and at the risk of sounding greedy, it is money that our country could use right now to pay down it’s deficit.
I think this speaks to one thing; to the need for real reforms in our system of taxation. Who can deny that it is far too complex and convoluted? There is no good reason for it to be so, save one. Because of it’s complexity, Congress is given a much stronger grip on policy. Who can deny that they have came up with some very creative ways to tax their constituents? (That’s you and me.)
IS THE FAIR TAX THE ANSWER?
As some of you may know, I have been and remain a fan of The Fair Tax. In all honesty, it probably has very little chance of every going to the floor of the House or the Senate, much less being passed, but the simpleness and the fairness of the idea speaks to a lot of Americans. Is it not time that our system of taxation is reformed and changed for the better? No matter if it’s The Fair Tax or some other reform that would simplify the system, I would be all for it. One only has to look at how the system operates now to see that something should be done.
As it stands right now, we have very wealthy Americans who feel they are being taxed to death. Thus, they are taking extreme measures to stop the bleeding. On the other hand, we have Congress and the IRS who are looking for more tax dollars to spend. Combine these two together and we have a very expensive and complex game of cat and mouse, played with money who should be staying on American soil. Instead, it is being driven overseas, where it does America little or no good.
Need I say it again, something has to change. What say ye?
