The Internal Revenue Service has asked a Federal District Court to order First Data to reveal account information on  merchants that sell offshore services such as financial transaction processing.

The summons, if approved, would force the company to ID US clients who, through an offshore credit card, offshore debit card or other unspecified financial processing methods, “may have diverted unreported income offshore or received unreported income from undisclosed offshore sources or have taken improper deductions or credits or have failed to withhold tax on certain payments made offshore,” all going back to 2002.

The I.R.S. is claiming that First Data has marketed and sold offshore services to US merchants – offshore service providers, who in turn used First Data’s service to help their clients hide what otherwise would be taxable income.

First Data spokesperson Ms. Goeson said, “we have an excellent track record of cooperating with all government agencies and expect to continue our practice of complying with all lawful requests for information with due regard for the confidentiality of our customers’ data.”

The I.R.S. investigation seems to be targeting a subsidiary known as First Data Independent Sales. The subsidiary, which works with 3,200 independent sales offices and agents, began pushing offshore processing services through a web compay from Bermuda called First Atlantic Commerce.

First Data, according to the I.R.S., “clearly markets offshore merchant account services to U.S. merchants as a means of tax avoidance by advertising its services on the Web sites of foreign promoters of abusive offshore tax schemes and products.”

The declaration claims processing and settling functions of the credit card transactions were performed by First Data Merchant Services.

Mr. Reeves is the lead investigator of the I.R.S.’s efforts to examine offshore credit card abuses.

In the past, the I.R.S. issued a summones to eBay, Visa International, and Mastercard.  The agency wasnt able to convince many clients with credit cards linked to offshore accounts to surrender their identity.  However, the IRS is now broadening its focus to include merchants.

ed note: The timing of this press release is highly suspicious and bordering on obvious scare tactics.  This story with the cooperation of the nytimes was released to the public on tax day, April 15th in the US.  The Revenuers are getting more desperate in their efforts to intimidate the populace into compliance it would seem.

Privacy, Asset Protection and greater freedom of movement are just some of the qualities that lure investors offshore.

Some people are happy to have their money safely locked away, an insurance policy against volatile stock markets, currency fluctuations and avaricious authorities.

Others see investing offshore as a way of maximizing their return, they want to see their investment pay for itself.

You have or are thinking about opening an offshore bank account – how can you make your money work for you?

*Disclaimer*

Not all of these options will suit every investor – and remember that every great investment will be balanced by risk. If you are prepared to take the risk and have some idea about what to do with your money – here are some options I would definitely recommend.

Gold – In addition to being one of best financial reserves you can get, gold can actually increase in value during a bear market. If you had bought an ounce of gold in 2003 you would by now have nearly tripled your investment in only 6 years!!! Gold has its own intrinsic value unlike paper monies which can fluctuate wildly, especially in economic downturns when countries ‘compete’ to devalue their own currencies. Imagine having your very own ‘plan b’ stored in a safe deposit box, anonymously, out of reach of creditors, greedy lawyers, the taxman and anyone else with a covetous eye on your assets. Best of all the your hoard’s value is secretly hitting the sky…

Certificates of Deposit – Rather than let your offshore assets sit idly by while inflation gobbles them up, invest in a CD or interest bearing account. Ranging from a couple of months to several years, these will pay you interest, usually based on a fixed annual rate. Sometimes you can get much better interest rates in a different country – this is one of the primary reasons for moving offshore – but remember to do your research beforehand. There have been countless cases of scams where investors were promised fantasy interest rates and ended up losing everything to a ponzi scheme. Part and parcel of ‘soft-touch’ regulation in tax havens is that you will come across schemes like these. The best method of research is to ask other banks who have had contact with the institution to give their professional opinion. Always remember the maxim – ‘if its sounds to good to be true, it probably is’. A bank offering interest rates of 10% when the benchmark is set at 2% is either a fraud or in serious financial trouble.

Tax-Free Trading – Once you have invested in an offshore bank account, think about expanding further and trading stocks or forex offshore. Most banks and brokerages will charge you for opening a stock brokerage account, but some might even do it for free! From a trading account you can buy and sell shares in all the major markets- anonymously- and since your account is offshore your gains are also tax free! Fees will vary greatly depending on the brokerage, but the best ones will give you an online platform so you can manage all your trades from the comfort of your own home, and with low overheads they can afford to charge nominal premiums on each trade.

Exotic Investments – Exotic investments are usually more risky than average, and may consist of financial instruments such as sovereign & corporate debt, high-yield investment schemes and other investments which are outside of your domestic reach. The best bet here is to find a broker you can trust to advise you in this area. If you are willing to accept a high degree of risk, exotic investments may just be for you, since in return for high risk the results can be spectacular.

Are you ready to take a giant step forward, and start making your money work for you?

Capital Conservator is unique among the choices that you will find offshore. Not only do our bank accounts offer a level of anonymity which you cannot find anywhere else, we give you the tools to seamlessly invest offshore. Don’t waste precious hours looking for an expensive brokerage house or gold respository that makes you pay through the nose, we give you access to all of these for free! Anonymous gold, tax-free trading, CD’s and exotics with no markups. Try our offshore investing, you’ll like it!

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The orders come amid fears that executives could be arrested and forced to reveal their banking secrets if they set foot in America.

The IRS probe into alledged tax evasion by some of UBS’s wealthiest US clients has already yielded one casualty, with a senior UBS executive taken into custody for questioning last year.

Earlier this year, Raol Weil the former head of UBS’s wealth managment arm was formally declared a fugitive by US authorities after failing to give himself up on charges that he conspired to help American clients to hide their assets.

Some Swiss banks are even forbidding travel to France and Germany, in recognition of the deteriorating relationship between Switzerland and these countries over the issue of Swiss bank secrecy, and a perceived worldwide ‘crackdown’ on offshore banking.

The Swiss Banking Association has played down these statements – it is not recommending that its members  abroad out of fear of arrest – said the group’s chairman on Thursday. Individual banks however, are free to issue their own guidelines.

The IRS is increasing the pressure on US citizens who opened secret Swiss bank accounts.  The IRS is apparently attempting to get the account holders to inform on their advisers or bankers.

The Associated Press was told that demands for information and evidence are increasing — especially since the government sued UBS.  IRS Commissioner Douglas Shulman is also presenting a six month grace period for those with secret offshore accounts to come clean under specific terms and penalties.

The US wants UBS to turn over information on as many as 52,000 U.S. customers.  Earlier this year, the bank agreed to pay $780 million in addition to revealing the identities of around 250 U.S. clients.  However the Justice Department has pressed to get access to the other names.

Swiss authorities are promising to try to protect their bank secrecy.

Outside of Switzerland, the UBS case may also uncover other offshore accounts held by Americans in an attempt to avoid US taxes. The IRS’s offer applies not just to UBS or Swiss offshore banking clients, but to any U.S. taxpayers who have opened an offshore bank account anywhere.

Robert McKenzie, a lawyer with more than a dozen Swiss offshore bank clients considering voluntary disclosure of their  account information to the government, said newer clients coming forward are being grilled by authorities seeking a deeper understanding of how the accounts work and who handles them.

“My view is the IRS is now looking to find those who promote these financial devices, and give advice on these financial devices, and expand the investigation,” he said.

New account holders who come forward now get detailed questions about any travel to conduct the offshore banking business, documents and correspondence related to the accounts, and which bank employees helped them manage the accounts.

The IRS commissioner, in a conference call Thursday said that the IRS was allowing a  six-month window for offshore bank clients to come clean.

It was reported that a plan is underway to reduce the penalty for those who hid overseas bank accounts. The plan is designed to get wealthy people to declare their offshore accounts in order to receive a new lower penalty.

In the plan, the I.R.S. will reduce the penalty for not filing a “Report of Foreign Bank and Financial Account”, also known as an FBAR.

The current penalty for failure to file an FBAR is fully one half of the max balance of each offshore account over the last three years. The new plan will redue that penalty to 5 to 20 percent, depending in part of the source of the funds. In addition, the IRS will make offshore account holders pay taxes and interest, and assess a penalty of 20 percent. In addition, filers must file amended tax returns for the last six years.

The plan is not amnesty, however, makes potential prosecution “less likely”.

Last year a settlement proposal for offshore bank account holders fell through at the last minute.

The new plan may do a better job of getting offshore account holders to claim because UBS, the Swiss private bank, is under pressure to give up 52,000 client names.

One after another, Monaco, Bermuda, Switzerland, and Singapore offshore banking announced that they will comply with new international rules which introduce more transparency and will govern the exchange of information with regards to money and depositors in their banks.

Banking secrecy, it is argued, should be removed.  Everyone should have to pay taxes, and people who have nothing to hide have nothing to fear.

Others call the EU’s offensive against offshore financial centres a “cheap populist measure” designed to deflect voters’ attention from the current financial crisis.

EU officials seem to have forgotten the reason for offshore financial centres. Switzerland, the biggest offshore financial centre for decades - thrived not by attracting money from crooks but, rather, by earning the confidence of law-abiding individuals.

When Europe was at war, and when private property was frequently nationalised or stolen, the Swiss offshore banks remained an oasis of stability, a place where one’s assets were secure.

The Swiss bank secrecy legislation was enacted during the 1930s, in order to prevent the Nazis from spying on people.

So, parking one’s money in offshore banking accounts is often a reflection of the political or financial uncertainty in one’s country of residence.

Banking secrecy is not merely a ruse to enable tax evasion. Confidentiality is a base principle for all banks.  People who have nothing to illegal to hide also want to keep their financial affairs to themselves.

Not all offshore financial centres are identical. Although many copied the Swiss offshore banking model, all operate in different legal jurisdictions.

The head of the OECD admits that Singapore and Hong Kong cannot be classified like UE  ‘tax havens’. However, all are threatened with unspecified sanctions if they do not comply lift their secrecy veil.

The US government produced a list of 52,000 American citizens who allegedly have bank accounts in Switzerland. Germany stole private banking records from Liechtenstein, a neighbouring country. Apparently, as long as offshore financial centres are small and vulnerable, their sovereignty is in question.

Of course, like everywhere throughout this controversy, hypocrisy is everywhere.  To wit, the biggest tax haven is actually the US itself.  The US has no dividend, interest or capital gains taxes on the earnings of foreign investors in America, thereby helping foreigners to escape those tax charges back home.

However, given the current economic crisis, most politicos have decided that scapegoating small offshore banking centres provides a useful diversion.

No doubt, the storm will pass. And the world’s rich will still find someone willing to accept their cash, in return for the discretion and predictability which most European countries are no longer capable of offering.

Speak your mind. Just leave a comment below..

The conspiracy indictment, accuses Bradley Birkenfeldthe , former banker, of helping the developer evade taxes on $200 million.  The funds were held in bank accounts in Switzerland and Liechtenstein.

The developer was identified as Igor Olenicoff, a billionaire, and founder of Olen Properties.

The indictment is part of an American attempt to increase scrutiny of offshore tax transactions.  It is one part of a widening federal investigation into UBS, and its private bank based in Zurich, and whether it helped wealthy clients evade taxes.

According to the indictment, the two men created fictitious trusts and bogus offshore company structures to conceal the ownership and control of offshore assets.  In addition, the indictment accuses them of also advising clients to destroy bank records and helping them file false tax returns.

“The two men and others made several trips to the United States to pitch tax plans that were intended to conceal American bank clients’ ownership of accounts in a Swiss bank, the indictment said.”

The plans that were pitched to US clients let UBS avoid disclosure of certain income information to the Internal Revenue Service while also evading certain American tax requirements. The pitch hinged on the inpentrability of Swiss and Liechtenstein bank secrecy.

Mr. Olenicoff already pleaded guilty to charges of tax evasion and to lying on his tax returns, and agreed to pay back taxes totaling $52 million. 

An interim report, set to be presented on May 14, “very clearly points in the direction of a revision,” the commission’s director general for taxation, Robert Verrue, told AFP on Tuesday.

“He said that the report aimed ‘to alert ministers to the current directive’s weak points’ in the wake of recent revelations of alleged tax fraud by rich Germans hiding their cash away in Liechtenstein.”

The savings tax directive , in it’s present form, already requires EU member states to share tax information with one other on interest income kept by account holders from other EU countries.

However, special arrangements have been made for Austria, Belgium and Luxembourg to protect their jealously guarded banking secrecy.

“The EU has similar bilateral agreements with a clutch of countries and territories known for their banking secrecy laws, including Switzerland and Liechtenstein.”

“However, the savings directive allows considerable scope for people to set up foundations in order to get around the rules, which also do not cover such revenues as dividend income or capital gains.”

“The directive also does not cover fast-growing Asian offshore banking centres such as Hong Kong, Macau and Singapore, with which the EU is struggling to negotiate similar information-sharing accords.”

EU members are obviously deeply divided on the issue of banking secrecy. In light of this, the commission has said it, “will try to find out on what points there are nevertheless a majority” in agreement, before making proposals.

HM Revenue & Customs (HMRC) is contacting approximately 5,000 people whom it believes have undeclared assets and investment income in offshore accounts.  HMRC is saying that they have one last chance to come clean or face stringent penalties.

“Accountant PKF said the measures turn one of the central tenets of the English legal system on its head — by presuming that taxpayers are guilty and demanding proof of innocence.”

“Tax investigations partner John Cassidy said: “Legally, to issue an assessment for unpaid tax, HMRC must have made a ‘discovery’ or, in other words, have actual knowledge that further tax is due — not just that it might be due.”

While taxpayers aren’t under legal obligation to respond to inquiries, those who fail to will face an investigation and potentially large financial penalties.

The chief of taxation at the Association of Chartered Certified Accountants, Chas Roy-Chowdhury, said:  ‘They (HMRC) are depending very largely on the willingness of offshore account holders to inform the taxman of their financial details, but if this is not done proactively, the taxman will find other ways and means, such as targeting banks and finance providers.

‘This is an opportunity to put things right with the taxman, but they also warn that if a disclosure is made which shows interest and income has been received, then interest is payable and in some cases the taxman will seek ‘penalties’.

While the HMRC has said they will take cooperation into account, penalties will now be no less than 30 percent of the sums due.

“‘Tax evaders had their chance to come clean and pay reduced penalties of 10 percent last year,’ said Gary Ashford, a tax investigations director at accountant and business adviser Grant Thornton.”

“‘Now, HMRC is playing hardball and will be taking no prisoners.’”