Could Swiss Banking Demise Help Our Deficit?

Swiss Banking has been rocked in recent weeks by the large settlement made by Swiss banking giant UBS with the United States government and the prospect that offshore banking may finally be challenged by ongoing concerted efforts by numerous government taxing authorities. The $780 million setttlement UBS made with the IRS includes identifying 250 of their American clients. There are reports that UBS is also being pressured to release the names of an additional 52,000 clients, presumably wealthy Americans who owe money in taxes.

Swiss Banking has a long storied tradition for secrecy which has helped Swiss Banks amass more than $5 trillion in offshore deposits. Swiss Banks ,like UBS based in Zurich, are protected by Swiss law from revealing the names of their customers. In the recent past Swiss Banking  lost much its prestige when it was revealed that funds and valuables that Jewish Europeans left in Swiss Banks following Nazi persecution in World War II were kept by Swiss banks in secrecy with no effort made to track down the rightful heirs. Now comes the revelation that Swiss Banks may have done more than accept offshore deposits, that Swiss Bank officials may have been very active in aiding Americans evade taxes.

The good news for the United States Treasury is that a significant amount of dollars may be coming back into the tax coffers. We know that UBS catered to wealthy Americans with net wealth of over $1 million dollars. Assume that each of  the 52,000 Americans that  UBS allegedly sheltered money have an outstanding tax bill of $300,000. That comes to a quick $15.6 billion owed back to the U.S. right away. Add in the fact that these Americans will now pay income taxes every year on their income, dividends and capital gains. And add in the fact that UBS is just one of the Swiss Banks known to attract wealthy Americans. It may reasonable to assume the United States may have added $100 billion to the Treasury by their recent pressure on Swiss Banks. That is $100 billion less debt to pass on to our grandkids.