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Tax crackdowns on the Swiss: the needle seems stuck

In the age of iTunes and other digital downloads, the image of a stuck record harkens back to a bygone time.

There are, however, still many connoisseurs of vinyl who keep the traditions of long-play records alive. In other words, the notion of the needle being stuck is by no means merely an exercise in nostalgia.

We employ this needle-stuck image because, when it comes to U.S. authorities and the Swiss, it seems like the needle is stuck on a song called "crackdown."

As we have discussed regularly in this blog, a U.S. crackdown on Swiss banks for allegedly allowing offshore tax evasion by U.S. taxpayers has been going on for several years now.

The latest bank to come under scrutiny is Credit Suisse. Foreign-account compliance by Credit Suisse and other offshore banks is expected to be the subject of a hearing today in Congress. We discussed those issues last week in our February 21 post.

The latest episode in the needle-stuck crackdown on the Swiss concerns insurance products. The Wall Street Journal reported a few days ago that U.S. authorities are trying to identify whether a particular type of insurance product may have been used to hide assets for U.S. taxpayers.

The product is called private-placement life insurance. It is a hybrid-type product, mixing aspects of banking and insurance. In insurance lingo, the product goes by the name PPLI.

The U.S. Justice Department and the IRS are subjecting Swiss insurers to scrutiny for using PPLI. U.S. authorities are doing this even though there are perfectly legitimate tax deferral reasons for using the product.

In short, when it comes to U.S. authorities and the Swiss, the needle seems stuck on an oft-heard song featuring the frequent repetition of one word: crackdown.

Source: The Wall Street Journal, "U.S. Examines Swiss Insurance Products in Tax Crackdown." John Letzing, Feb. 23, 2014

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