Trust Updates Archive

2008 IRS Banks Taxes Liechtenstein Trust Estates Senate Germany IRS Targets Liechtenstein Trust Accounts

Feb. 27, 2008--Chicago, IL)--The IRS is initiating enforcement action against more than 100 U.S. taxpayers who have trusts in the tiny European principality of Liechtenstein, which international regulators have identified as an uncooperative tax haven. Misuse of trusts ranks high on the IRS list of “Dirty Dozen” tax scams. Internationally there is growing concern that trusts are playing an integral part in money laundering.

Today's IRS action follows a crackdown by the German government on tax evaders that came to light February 14 with the resignation of the head of Germany's post office, Klaus Zumwinkel. German tax authorities say Zumwinkel used Liechtenstein trusts to evade nearly $1.5 million in German taxes.

The IRS investigation into the use of Liechtenstein trusts by U.S. taxpayers was in process before the German tax affair was made public, an IRS spokesman told Trust Regulatory News.

According to European news sources, the German government paid Heinrich Kieber,  a former employee of the Liechtenstein Global Trust Bank (LGT Bank), 4.2 million Euros -- approximately $6.2 million -- for information on "thousands of trust accounts held by the bank." Kieber allegedly stole the information while employed by an LGT Bank subsidiary specializing in foundations. The British government is reported to have paid some $200,000 for names of British nationals suspected of using trusts at LGT Bank to evade taxes.

IRS sources acknowledge that information about U.S. taxpayers with Liechtenstein accounts came from "an informant," but will not confirm the individual's identity and deny paying for the information.

"The IRS does not pay upfront for [such] information," according to IRS spokesman. However, the agency annually receives some 5,000 Form 211 complaints, information on potential tax evaders. In 2003, the agency found that additional taxes were owed in less than 4 percent of these cases. Complainants are paid a portion of what the IRS successfully recovers.

Liechtenstein's government, using language that references WWII aggression, has accused Germany of "invading it's country" and has labeled Kieber a criminal and outlaw. Germany has provided Kieber with a new identity because of threats on his life.

Tax authorities in Australia, Canada, France, Italy, New Zealand, Sweden, and the United Kingdom, all member countries of the Organization for Economic Cooperation and Development's Forum on Tax Administration, have announced that they will be working with US and German authorities to address the issue of tax evasion through Liechtenstein trusts.

The Senate Permanent Subcommittee on Investigations, which issued a report on tax haven abuses in 2006, will be conducting its own probe of U.S. taxpayers' use of Liechtenstein trusts to evade taxes, according to committees chair, Senator Carl Levin (D-Mich.).

For more on this topic, see the upcoming issue of Trust Regulatory News.

No statement in this issue is offered as or should be
construed as legal opinion or advice

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