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Tag: tax case

  • UBS Settles Credit Suisse U.S. Tax Case for $511 Million

    UBS Settles Credit Suisse U.S. Tax Case for $511 Million

    UBS Resolves Credit Suisse Tax Investigation with $510 Million Settlement

    The U.S. Department of Justice has concluded its protracted investigation into Credit Suisse’s tax practices, resulting in a settlement considerably lower than initial projections.

    In a significant development within the retail banking sector, Credit Suisse Services—now a subsidiary of UBS Group—will pay over $510 million to resolve two major U.S. tax inquiries. The settlement, announced by the Department of Justice (DOJ), addresses serious misconduct involving American clients.

    Major Allegations and Settlement Details

    The guilty plea from Credit Suisse reveals its role in aiding U.S. taxpayers to conceal assets totaling more than $6 billion across offshore accounts. This included over $4 billion hidden in at least 475 undeclared accounts in Switzerland and an additional $2 billion linked to U.S. assets in Singapore. These actions occurred despite Credit Suisse’s previous admissions of guilt in a 2014 agreement aimed at achieving full compliance with U.S. tax laws.

    A Settlement Lower Than Expected

    Speculation surrounded the potential settlement amount, with earlier reports suggesting a figure much higher than the final tally of $511 million. This sum is broken down into $371.9 million related to Swiss misconduct and $138.7 million for issues tied to Singapore. Two critical factors may have influenced the lower resolution: changes in the administration’s enforcement priorities and the decline in interest in prosecuting past Credit Suisse executives following UBS’s acquisition.

    Continued Misconduct Up to 2021

    The DOJ’s findings confirm that Credit Suisse continued to assist American clients in tax evasion well beyond its 2014 commitment to compliance. Bankers engaged in activities such as crafting fraudulent donation documents and misrepresenting account holders as recently as 2021.

    Connections to Singapore and Ongoing Litigation

    The investigation’s ties to Singapore include claims of undisclosed funds associated with Georgian billionaire Bidzina Ivanishvili, who is currently pursuing legal action against Credit Suisse for alleged fraud. UBS has emphasized its non-involvement in misconduct, reiterating its stringent “zero tolerance” policy toward tax evasion.

    Looking Ahead: Financial Impact Still Unclear

    The ramifications of this settlement for UBS are still being assessed. While UBS anticipates a credit this quarter resulting from a contingent liability adjustment following its acquisition of Credit Suisse, a related charge will also be recorded.

    As this case culminates, it brings to light ongoing challenges within the retail banking sphere, particularly regarding compliance with tax regulations. The implications of this case could resonate through the sector, prompting a reassessment of regulatory practices and consumer trust in financial institutions.

  • Google Korea office raided by tax agency

    Google Korea office raided by tax agency

    The National Tax Service (NTS) launched an investigation into Google Korea on Wednesday, sending an official to secure accounting documents at the company’s office in Gangnam District, southern Seoul. The investigation is thought to be into YouTubers suspected of avoiding taxes, as NTS Commissioner Han Sung-hee previously promised during the National Assembly’s annual questioning session in October to take measures to “prevent tax evasion” by well-paid YouTubers.

    Commissioner Han revealed that the NTS had advised 513 YouTubers to pay income taxes in the past, and was open to launching investigations into those who have not declared taxes.

    The raid comes just a day after global IT giants like Google and Amazon were ordered to start paying 10 percent value-added tax (VAT) in Korea from next July.

    The National Assembly passed a bill to revise the country’s Value-Added Tax Act in a move to impose VAT on foreign IT firms, the Assembly announced Tuesday. Specifically, the revision means IT firms will have to pay 10 percent in taxes for revenue made from business-to-consumer services, which include online advertisements and cloud computing services.

    Also subject to VAT will be revenue made from online-to-offline services like hotel booking platforms that market online to raise sales in physical stores, as well as sharing economy services, which are spearheaded by companies like Airbnb. The revision will go into effect from July 1 next year.

    “We will continue discussing the issue of taxing business-to-business transactions between Korean and overseas firms, which could not be agreed on in this revision,” said Rep. Park Sun-sook of the minor opposition Bareunmirae Party, who submitted the bill for the revision.

    Like in other countries, the issue of taxing global IT giants has been the subject of fierce debate in Korea. Politicians have long raised concerns over how little IT giants like Google are being taxed in Korea, while domestic IT firms have bemoaned how the “reverse discrimination” was allowing overseas competitors to thrive at the expense of domestic companies.

    Google Korea is estimated to have paid less than 20 billion won ($17.7 million) in corporate taxes in 2016, when it raised nearly 5 trillion won in revenue in Korea in the same year through the Google Play store and YouTube advertisements. In 2017, however, Naver, which earned slightly less at around 4.67 trillion won, paid a total of 423 billion won in taxes, or 20 times more than Google.

    Strengthening regulations on corporate taxes will be much more difficult to achieve than changing VAT rules, however.

    Current international agreements like the OECD Model Tax Convention and tax treaties protect enterprises from paying income tax to foreign countries if they do not have permanent establishments in those countries. Though the definition of permanent establishments is often questioned, by current standards, Korea is not home to permanent establishments of any of the major IT firms – they mostly operate small affiliates here and conduct most of their business online from headquarters in the United States and other countries.

    These global IT firms only need to fulfill the corporate tax requirements for revenues made by their Korean subsidiaries, which is not much.