Interesting and taxation in the same context might be an oxymoron to many people where military intelligence and United Nations are better known examples. But regular exception seems to be US Tax & Financial’s www.ustaxfs.com annual seminar on/near 4^th July. Providing tax advice only (no accounts or audit work) last year’s one introduced How to make use of Foreign Tax Credits which US citizens acquire when working ex-pat (which can be invested in UK pensions, for example) but this year’s one has a scary Orwellian flavour. Like many good presentations, it starts with a history lesson commencing early in the millennium, when US Government finally gets the Swiss to disclose information about US nationals who have foreign bank accounts there. Estimates vary – Government view says, 1m accounts but with 4 – 7m Americans living overseas, the true figure might be higher.

Governments these days are generally strapped for cash so are not inclined to be kind where evading tax is concerned and the new penalties are draconian. Having already been fined US$780 million by the US Government for abetting tax evasion, UBS is expected to pay US$3 – 4 billion to settle the case next year. The Obama regime’s new rules are the most fundamental change in US tax law since the Kennedy regime of the early 60s. For the uninitiated, tax avoidance is OK (well usually) while tax evasion is not – problem being that the line between the two can be very thin and increasingly, governments have a habit of rubbing it out and drawing it in a different place.

The US Tax Return has a little box that you tick if you have a foreign bank account, but getting your tax return wrong = perjury. Having a non-US bank account does just not mean an account with your name on it as account holder either. It means that any non-US account you may have an interest in or have signing power over and the fact that you get no benefit from this account or have no knowledge of it isn’t the point. Where aggregate value is > US10,000, penalties can be up to 35 per cent of the account plus any tax that is due. So say, a British/American couple with joint bank, broking accounts and property may now have to report all their assets etc to the US Tax Authorities. The forms aren’t simple either and while the law has been in existence for years, enforcement and penalties are recent – with the new President it seems.

With the US Government getting into the Swiss banking system, French, Italian and UK governments think “me too” and HMRC creates a HNW (high net worth for my less affluent readers) unit and special section for the über wealthy. Quite logical you may think, but just to help them get the feel of the people they will be dealing with, HMRC hold a lavish launch party in Whitehall with champagne, canapés etc to which some tax professionals are invited – taking their cue perhaps from Labour MPs a few years ago where the likes of John Prescott and Tony Blair taking their Summer hols on some billionaire’s yacht were a common news story.

Nastiest aspect of the new rules though is that some of the wealth in Switzerland for example, was put there when people fled or were expelled from their homelands thus including, a lot of Jewish people and Iranians for example. Parents who may now be in their 80s have often told their children little or nothing about these accounts and one would hardly expect Swiss bankers to write to potential owners or beneficiaries telling them their good fortune.  The Swiss “Numbered Accounts” are legendary here. If you want to want know how much is in one of these accounts, you have to go the bank yourself and speak to the respective bank manager. Bank statements are generally not given unless specifically requested giving an interesting angle to the old saying, “if you don’t ask, you don’t get…”

But there is some good news, and the tax equivalent of “buy now while stocks last” or maybe a car boot sale, is an Amnesty. In the US, this has the label Voluntary Disclosure Programme which comes in a Noisy version (spill everything, conference call, pay everything including penalties – off the hook if you have told them everything) or Quiet version (whoops! I forgot something, here are the forms – hope everything is OK now).

Come Autumn, HMRC are due to have their version with the sale of a lifetime, bargain basement penalty of 10 per cent on unpaid tax, as cheap as any sanction gets for this sort of thing, provided full disclosure made and other conditions are met. 20 years of tax returns?? US states are at it too but calls to Alabama, Arizona, Connecticut, Massachusetts, New Jersey and Virginia reveal widely differing approaches especially as to whether previous non-disclosure will be treated as penalties and interest. To add to the fun, reporting detail of foreign bank accounts is done on a US Treasury form – separately from the IRS Tax Return and since these are Federal forms, there maybe state reporting to do as well.

Interviews with some of the IRS Criminal Investigation Special Agents who are enforcing the Voluntary Disclosure Programme start off with a list of 30 questions, with the first one something like: Are these funds legal or illegal? Sensible answer might be: can you define legal please?

Some of above Special Agents are young, inexperienced and don’t get through a lot of the questions properly but after 6 weeks, you get a certificate basically telling you if have been accepted into the Voluntary Disclosure Programme or not. In an unkind moment, one might think that the people drafting these rules don’t open an Atlas very often with one consequence that UBS and Deutsche Bank for example, have basically sent their US clients a cheque politely but firmly asking them to take their business elsewhere with Lloyds TSB recently announcing they would be doing this too.

It’s all a bit sad. Tax avoidance used to be a game for intellectuals where a smart individual would spot a loophole which would be closed down at the next Budget. But political pressures have made this a game of “hardball” with sometimes retroactive legislation (e.g. apportionment rules for film tax schemes) and one wonders how much of the extra revenue goes into running the cost of an ever-enlarging public sector? With their employment and pensions effectively guaranteed or insulated from the rules of government, no end it is sight and in the meantime, we all get poorer – there are people in government who seem to believe that increasing taxes will somehow stimulate economic growth.

For the foreseeable future and if you have money that is spread around a bit, the word is probably Amnesty – but for God’s sake get proper advice, as the above is but a brief summary.