Tuesday, June 30, 2009

Swiss Banks opt out of Extortion

June 29 (Bloomberg) -- Swiss banks are shutting the accounts of Americans as the U.S. Internal Revenue Service accelerates the hunt for tax dodgers.

UBS AG and Credit Suisse Group AG, the country’s biggest banks, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers.

While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about 30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers.

“My bank doesn’t want to do that, so we wouldn’t accept an investment account for a U.S. person,” said Pierre Mirabaud, chairman of Mirabaud & Cie. and the Swiss Bankers Association, during a lunch at the American International Club of Geneva.

This is another example of too many government rules and regulations getting in the way of companies providing a service. British companies started closing US accounts and the Swiss have now followed suit because the cost of compliance with the IRS is greater than the return that can be earned on them.

Now for those of you who think people shouldn't be able to avoid taxes, let's think about why they would want to avoid taxes in the first place and if there is a better way to collect taxes. Rich people do not pay the same percentage of income as poor and middle class people. They pay on income less the myriad deductions allowed by the IRS. We need a tax system that incentivizes saving and investment instead of taxing people for working hard. A consumption tax is the best way that I've figured out. Capital gains and income taxes need to be eliminated. The corporate income tax should be abolished. Less taxes and compliance costs lead to more jobs which would help us get out of the Greater Depression.

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