[Congressional Record Volume 160, Number 91 (Thursday, June 12, 2014)]
[Senate]
[Pages S3634-S3635]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX TREATIES
Mr. LEVIN. Madam President, the unanimous consent proposal that I
just made a few moments ago that was objected to by the Senator from
Kentucky related to the need of the Senate to take up the ratification
of five tax treaties that were approved by the Committee on Foreign
Relations on a unanimous voice vote, including a revised U.S.-
Switzerland tax treaty that was amended in 2009, with a protocol
enabling the United States to obtain more information--more information
from Switzerland about U.S. taxpayers with hidden Swiss bank accounts.
We have been trying to close down these offshore tax havens and the
way in which they aid and abet American tax avoidance for years. Here
we have a tax treaty which will help us get more information about the
American taxpayers who are trying to avoid paying their taxes to Uncle
Sam, and we get an objection to the ratification, even to taking up the
ratification of this treaty.
American taxpayers have had it. I would say have had it up to here,
except that will not come across on the record. They have had it with
profitable corporations and wealthy individuals avoiding taxes through
the use of tax havens, shell companies, and tax avoidance schemes. The
American people want us to end it. We ought to legislate an end to it.
By the way, it is long overdue. We ought to close the tax loopholes
which are used so the most profitable corporations in this country
avoid paying taxes by shifting their intellectual property to shell
corporations that they create in tax havens or by other kinds of tax
dodging.
We can put an end to it. We can close those tax loopholes. We ought
to do it but that is not what should be before us today. What should be
before us today but for that objection we had from the Senator from
Kentucky, are the tax treaties which have been approved by our Foreign
Relations Committee, one of which was signed 4 years ago.
We have all heard about Swiss bank accounts that are used to hide
money from Uncle Sam. Back in 2008, in a bipartisan report I issued
with then the ranking Republican on the Permanent Subcommittee on
Investigations, Norman Coleman, with bipartisan support, we disclosed
that UBS, the largest bank in Switzerland, had opened as many as 52,000
bank accounts, with about $20 billion in assets, for U.S. citizens who
had hidden their accounts from our Treasury.
UBS later signed a deferred prosecution agreement with the U.S.
Treasury and the Department of Justice in which they admitted helping;
that is, aiding and abetting, U.S. clients evade U.S. taxes. We are
talking about UBS now. They paid a $750 million fine. They turned over
the names of about 4,700 U.S. clients who had hidden accounts in that
bank.
UBS was not alone. Earlier this year in a bipartisan report--this is
not a partisan issue--in another bipartisan report that I issued with
my current ranking member, Senator McCain, the Subcommittee showed that
Credit Suisse, Switzerland's second largest bank, had been engaged in
the same type of aiding and abetting. Credit Suisse had opened about
22,000 Swiss bank accounts for U.S. account holders, with up to $12
billion in assets, that were undisclosed to U.S. tax authorities. After
its wrongdoing was exposed, Credit Suisse pled guilty to facilitating
U.S. tax evasion and paid a fine of about $2.6 billion.
In both those cases, the Swiss banks had quietly sent Swiss bankers
to do business on U.S. soil, opening accounts, sometimes in the name of
offshore shell corporations, arranging all of that; bringing in cash,
by the way, from Switzerland; and slipping account statements between
magazine pages to their U.S. clients. In order that there not be
anything visible at an airport or wherever, they put the statement of
their U.S. account holder in a Sports Illustrated magazine and would
hand the magazine to their clients. How surreptitious can you get?
We also heard about how U.S. clients who visited Credit Suisse in
Switzerland rode in a secret, remotely controlled elevator to a room
with no windows and reviewed documents that were then shredded. Why?
Why all of that secrecy and surreptitiousness? They wanted to show
those U.S. clients, to dramatize, just how secretly the Swiss banks
operate and how those Swiss bank accounts would be hidden from U.S.
authorities.
But after years and years of effort, we found out what was going on,
and we made it public. Even Switzerland could not defend what its banks
were doing.
So in 2009, Switzerland agreed to strengthen the U.S.-Swiss tax
treaty to enable us to obtain more information about secret Swiss bank
accounts opened by U.S. taxpayers.
It is still not voluminous information which we are going to get
under that tax treaty, but it is more information. It would give us a
better chance of finding the tax dodgers, those U.S. citizens who try
to avoid paying their share of taxes and dumping the tax load on all of
their fellow citizens, by the way, who have to pick up the added
burden.
So with the existing U.S. treaty--we already have a tax treaty with
Switzerland, the one that we want to amend--it requires us to establish
something which is very difficult to prove; that is, tax fraud, before
Switzerland would hand over the information on U.S. account holders
with Swiss bank accounts.
We have treaties with all kinds of countries. No other treaty we have
has that standard; that we have to show tax fraud before we can get
information from a foreign bank. So the revised tax treaty, approved by
the Foreign Relations Committee, again unanimously, would enable the
United States to obtain information from Switzerland that ``may be
relevant'' to
[[Page S3635]]
the ``administration or enforcement'' of U.S. tax laws.
That is the same standard, ``may be relevant,'' that has been in
effect for decades in the United States when the Treasury seeks to
obtain information in a tax inquiry about American citizens from their
own banks. That standard has been upheld by the U.S. Supreme Court.
I am not going to go through all of the cases that have upheld this
standard but there are two direct Supreme Court opinions on the subject
that say it is proper for Congress to legislate a standard of Treasury
getting information from banks about our people that ``may be
relevant'' to the requirement that taxes be paid.
The standard comes from a 1954 Federal statute that authorizes the
IRS, for the purpose of examining a tax return or determining a
person's tax liability, ``to examine any books, papers, records, or
other data which may be relevant or material to such inquiry.'' The
statute is 26 U.S.C. Section 7602(a)(1).
Thirty years ago, the Supreme Court upheld that standard in a 1984
case called United States v. Arthur Young & Co., 465 U.S. 805. The
Supreme Court wrote:
In seeking access to [a corporation's] tax accrual
workpapers, the IRS exercised the summons power conferred by
Code Sec. 7602, which authorizes the Secretary of the
Treasury to summon and `examine any books, papers, records,
or other data which may be relevant or material' to a
particular tax inquiry. . . .
The language `may be' reflects Congress' express intention
to allow the IRS to obtain items of even potential relevance
to an ongoing investigation, without reference to its
admissibility. The purpose of Congress is obvious: the
Service can hardly be expected to know whether such data will
in fact be relevant until it is procured and scrutinized. As
a tool of discovery, the Sec. 7602 summons is critical to
the investigative and enforcement functions of the IRS. . . .
In short, the Supreme Court upheld the authority of the IRS to
request information that ``may be relevant'' to a tax inquiry, and
described the ability to examine that information as ``critical to the
investigative and enforcement functions of the IRS.''
Last week Senator Paul indicated on the floor that the IRS can obtain
information from a U.S. bank only when it establishes ``probable
cause'' that the accountholder was cheating on their taxes. In fact,
the U.S. Supreme Court rejected that approach over 50 years ago in a
1964 case called United States v. Powell, 379 U.S. 48, in which the
Court wrote: ``[T]he [IRS] Commissioner need not meet any standard of
probable cause to obtain enforcement of his summons.''
The revised U.S.-Swiss tax treaty would instead apply the same
statutory standard to Americans with bank accounts in Switzerland as
already applies to Americans with bank accounts in the United States.
Using the same standard makes perfect sense. Otherwise Americans with
Swiss bank accounts would have a greater right to stymie IRS
information requests than Americans with U.S. bank accounts.
In addition, the Senate has already approved other U.S. tax treaties
using the relevance standard. They include a 1999 tax treaty with
Denmark, a 2007 tax treaty with Belgium, and a 2008 tax treaty with
Canada, among others. Those tax treaties already treat Americans abroad
in the same way as Americans at home.
In contrast, Switzerland has long been an exception in need of
correction. Back in the 1950s, the Swiss somehow managed to get the
United States to agree to make it harder for the IRS to scrutinize
Americans with Swiss bank accounts than Americans with U.S. bank
accounts, which helps explain why so many hidden bank accounts ended up
in Switzerland.
The UBS and Credit Suisse bank scandals show it is long past time to
end the Swiss exception.
So if we just keep this current treaty, without modifying it, we are
actually giving a standard to the Swiss that would allow them to keep
information away from our Treasury that is not permitted in our own
banks or to banks in any other country that we have a tax treaty with.
Why would we want to preserve a treaty standard that the Swiss
themselves have already agreed to replace with a better standard in
terms of tax collection? I mean, if the Swiss agree to a standard which
gives us better information, why would we want to keep in place a
treaty which denies us that information, denies revenue to the
Treasury, creates a double standard? If you want to avoid paying taxes,
go to Switzerland and you will have a better chance of evading your
taxes than if you stay in the United States. Why would we want to give
an incentive like that?
That is what we are doing. As long as we have the current treaty in
place and do not ratify the proposed treaty, that is exactly what we
are doing.
It is so unfair to give special treatment to Americans who send their
money to Switzerland, compared to Americans who keep their money right
here at home. It is one thing to advocate lower taxes--that is one
thing--but it is quite another to advocate policies that would help
U.S. taxpayers use Swiss bank accounts to hide their assets and to
offload their tax burdens onto the U.S. taxpayers who are not trying to
dodge paying taxes.
It has been now 3 years, as Senator Menendez has pointed out, since
the U.S. Senate has ratified a tax treaty. Ratifying this treaty would
finally bring the Swiss into alignment with U.S. policy and U.S. tax
treaties with other countries. Once ratified, it will take effect from
the date it was signed in order to help stop tax dodging from 2009
forward. It is long overdue that we ratify this.
I am very disappointed there has been another objection by Senator
Paul to proceeding to ratify--or to at least consider the ratification
of this treaty. I believe Senator McCain will try to come later, if he
can, to also speak in support of bringing up these treaties for debate.
I yield the floor.
____________________