Thousands of wealthy Americans are avoiding billions of dollars in taxes with the help of the Swiss banking giant Credit Suisse, according to the report by a US Senate panel.
The Senate Permanent Subcommittee on Investigations estimates the that Treasury is losing out on $10 billion-$12 billion per year in tax revenue thanks to some 22,000 Americans taking advantage of Switzerland’s infamously secretive banking system. The committee also accused the US Department of Justice (DoJ) of not doing enough to aggressively pursue tax avoidance by wealthy individuals and groups. The US Government has so far obtained the names of 238 Americans possessing secret accounts with Credit Suisse, or just over 1% of the estimated total.
The committee alleges that between 2001-2008 Credit Suisse, the second largest bank in Switzerland, recruited US clients to open bank accounts, then helped them conceal these accounts from the Internal Revenue Service (IRS). It also alleges that Credit Suisse actively enabled misconduct by bank employees.
Credit Suisse made no comment on the report.
Responding to the allegation that it has not done enough to pursue tax avoidance, the DoJ released a statement in which it said it was actively investigating 14 banking groups in Switzerland (though it declined to name any of them) and said “we won’t hesitate to indict if and when circumstances merit.” The senate committee has accused the Swiss Government of obstructing US investigators pursuing Americans suspected of tax avoidance.
The senate committee highlighted the elaborate and secretive methods Credit Suisse used to recruit US clients. According to CBS News:
“Over breakfast at a hotel, one banker handed a U.S. customer bank statements hidden in a Sports Illustrated magazine, the report said. The bank filed visa applications for employees that falsely portrayed them as tourists and maintained a New York office with lists of middlemen who set up offshore shell companies for some U.S. customers, the committee asserted.”
Speaking at a news conference the chairman of the subcommittee, Senator Carl Levin of Michigan (D) said that Credit Suisse “aided and abetted U.S. tax evasion, not only from behind a veil of secrecy in Switzerland, but also on U.S. soil by sending Swiss bankers here to open hidden accounts.” He criticized the DoJ for not investigating Credit Suisse as aggressively as it pursued the largest bank in Switzerland, UBS. Senator Levin also chastised the DoJ for relying on treaty requests to the Swiss Government to investigate tax avoidance, which have become bogged down in the Swiss courts. Levin told the gathered journalists that “It’s time to ramp up the collection of taxes due from tax evaders on the billions of dollars hidden offshore.”
Tax avoidance and evasion by wealthy Americans and corporations is a source of major contention in the United States. The Republican Party believes that the best way to cut the deficit would be to cut taxes, including corporate taxes. Additionally Republicans want to ease the tax burden on profits US corporations make abroad, arguing this would encourage them to invest more in the United States. Democrats believe that much more should be done to actively pursue and punish tax dodging. They claim that the US economy is losing out on billions of dollars in revenue every year because the top 1% of earners and powerful corporations are taking advantage of weak laws on tax avoidance and evasion. The scale of this elaborate system of avoidance and evasion is staggering. Last year the Guardian newspaper reported that a leaked report had revealed that around $32 trillion was being stored in the British Virgin Islands, a well-known tax haven used by the super-rich. To put that figure into context, that $32 trillion is almost twice the size of the entire US economy.