US tax evaders hold breath as court decides fates
July 14, 2009
A recent chapter in the battle between tax authorities and evaders is being played out in the US courts. And more than 50 000 suspected US tax evaders wait in trepidation for the outcome of the battle between the US government and Swiss bank UBS over revelation of their identities.
The parties to the court action are now attempting a settlement, but it is not at all clear that a settlement will get the tax evaders off the hook.
The case was sparked by a whistleblower who previously worked for UBS. And further information was possibly extracted from a US-based UBS employee who was detained by the US authorities as a "material witness". Press reports say he has not been available for comment.
Earlier this year, the Swiss banking regulator forced UBS to reveal the names of 255 suspected US tax evaders in contravention of Swiss banking secrecy laws.
According to AP yesterday, the UBS case has persuaded hundreds of US taxpayers with offshore accounts to come clean with the Internal Revenue Service (IRS) under a "voluntary disclosure programme" that allows most people to pay a fine and back taxes without facing criminal prosecution.
"The IRS would like to continue the spectre of fear that this UBS case has created," Robert McKenzie, a tax attorney with the Arnstein & Lehr firm, told AP. "This strategy is working. The level of calls I'm receiving is picking up, not going down," he added.
The turn events have taken has turned out to be an ill wind for tax evaders and their advisers that blows a lot of good to the lawyers.
EU's gravy farm
A UK diplomat famously described the EU's common agricultural policy (CAP) as "the most stupid, immoral state-subsidised policy in human history, communism aside".
It is also extremely controversial and the release in April of the names of the beneficiaries of CAP largesse did nothing to diminish the controversy surrounding it. It seems the major beneficiaries are large food companies, such as Danisco, Nestlé, Tate & Lyle, and wealthy landowners - including Liechtenstein's crown prince - who isn't even an EU citizen.
Recent reports that the EU had cut support for its agriculture by between 70 percent and 80 percent since 2003 are certainly encouraging, although a tad misleading.
The challenge for the Eurocrats is of course in trying to balance the desire to reduce the huge international embarrassment caused by the CAP payments with the demands from the EU's organised and well-resourced farming lobby.
It is estimated that EU farmers receive between a third and a half of their income directly from taxpayers; a gift horse the farm lobby will not release easily.
One much talked about CAP reform was the 2003 decision to decouple subsidies from production. This involves the single payment scheme, in terms of which farmers receive payments merely for having farms - nothing had to be grown.
In order to encourage more growing of nothing the EU subsequently introduced the set-aside payment, in terms of which farmers were paid not to grow anything on a portion of their land.
The Eurocrats are happy with these reforms which they say are non-trade distorting, but critics point out that for every dollar the EU gives in aid to poorer countries, it takes away $2 (R16.5) because of the unfair trading built into CAP payments.
Rising sun for motor sector
Despite the severe financial distress being experienced by South Africa's motor industry because of the global financial crisis, exciting times lie ahead.
This much should be clear from the announcement yesterday by Chinese state-owned vehicle manufacturer Chana Auto Company (ChangAn) that it is to invest $80 million (about R660m) in South Africa in the next five years, to establish a production plant with an annual capacity of more than 50 000 units.
The plant is expected to create about 1 000 local job opportunities and Chana anticipates it being the base for the production of right-hand-drive vehicles globally.
The significance of ChangAn's move is that its investment will be the first in a greenfields vehicle assembly plant in about 40 years. And further local vehicle assembly announcements by other vehicle brands are imminent.
Mahindra South Africa, the local arm of the Indian conglomerate Mahindra & Mahindra, last month said it planned to establish a vehicle assembly presence in South Africa, although this is likely to involve a contract manufacturing agreement with an existing manufacturer and not an investing in a greenfields plant.
Tata, the local holding company of the diversified Indian group, also confirmed last year it was considering manufacturing vehicles in South Africa, but has remained coy about the timing of its plan.
The planned investments by these three vehicle manufacturers are indicative of a potentially huge realignment in the South African vehicle market.
Labour costs are an important element in the cost competitiveness of vehicle manufacturers and the prospect of a Chinese vehicle manufacturer establishing a plant might make trade unions fearful about the impact ChangAn could have on labour rates in the local market. However, provided the National Union of Metalworkers of SA and the Labour Department fulfil their mandates and responsibilities, these fears should prove unfounded.
Edited by Peter DeIonno. With contributions by Ethel Hazelhurst, Ann Crotty and Roy Cokayne
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