Info Center Recent ArticlesFollowing are articles that may be of interest. They are in part culled from various news sources, professional publications and/or government pronouncements.
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Swiss Banks Knuckle Under to IRS Prosecutions
Swiss Banks are reporting substantial declines in profits in the wake of both the IRS pursuit of hidden bank accounts of Americans and the decline in the Euro. Julius Baer profits fell 27% last year.
The Julius Baer Group has reported that it is negotiating with the IRS as to how much it will pay the US in fines and how many of its American depositors’ names it will turn over to the IRS. UBS AG settled with the IRS in 2009 paying $780 million in fines and handing over 4,500 names of American depositors.
The Wall Street Journal reports that the Swiss government is negotiating a sweeping settlement with the US for all Swiss banks that may have helped Americans evade taxes along with agreement on how many thousands of names of American depositors the Swiss banks will turn over to the IRS.
The Wall Street Journal also reports that many Swiss banks are reporting a drop in profits of more than 25%, in part due to currency fluctuations but probably also due in great measure to the withdrawals by depositors as a result of IRS prosecutions. To read the Wall Street Journal article of February 7, 2012 click here.
Mas Hachnasah Wins Big
The Israeli Tax Authority (“ITA”) has for many years been fighting against companies calculating the tax on salaries of spouses working together in closely held companies owned by either or both spouses contending that in such circumstances both spouses' salary taxes should be calculated as if earned entirely by the husband. The result of that treatment is to substantially increase the tax on both salaries.
Over the last four years district courts have been split in their interpretation of the law such that some courts have allowed a reasonable salary to be allocated to each spouse while other courts have required the two salaries to be taxed entirely to the husband thus being taxed at higher rates of tax.
The Israeli Supreme Court has now ruled in favor of the ITA saying that while the law is prejudicial against women, it is up to the Knesset to change the law to make the matter more equitable. To read the article in the original Hebrew as published by The Marker on February 7, 2012, click here.
New IRA Gaining Popularity
It is not Irish and it is not American, but it is Israeli. A recent article in TheMarker discusses the Israeli IRA. Introduced in 2010 as an individually administered Kupat Gemel, this new approach to pension plans is modeled after the American Individual Retirement Account. This IRA allows you to decide how your retirement funds are to be invested.
Newspapers have reported losses in the value of almost all (if not all) Israeli retirement funds in 2011. If you believe that you could have done better than the so called professional fund managers, here is your chance. The new IRA is held by an investment house that does not manage your IRA, but executes transactions at your instruction. They also charge about half the fees that the regular funds are charging: 0.4%-0.7% rather than 1%-1.4% of the value of the portfolio. (Note: a 0.5% saving on a Gemel portfolio worth 400,000 NIS = 2,000NIS annually.)
Other advantages of the new IRA include:
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Transparency - You can see exactly where your money is invested. You can track exactly how your portfolio is doing and to some extent why it is increasing or decreasing in value based on what securities it holds.
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Flexibility – You decide what to buy and what to sell and when. If you believe it best to invest in Government bonds, or real estate, or gold, or foreign securities… you call the shots and decide when to execute the transaction. You also decide on investment strategies – more conservative or more risky. (Some may view this as a disadvantage…)
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Monetary Advantage – Besides the saving in management fees, you still preserve the tax status of the account and its tax exemption until distribution and you “touch the money”, as it were.
However, there are some important restrictions, mostly designed to limit the owner’s risks. For example:
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Your IRA may not invest more than 10% of its value in any single security;
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Investments are limited to Israeli securities or those of certain authorized countries including the USA, Canada, Australia and Eastern Europe.
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Your IRA may not invest in most kinds of options;
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However, investment in Israeli government notes and bonds is not limited.
The article indicates that many who invest through such IRAs are conservative (perhaps more so than the managed funds) and invest in market funds or ETFs. For example, it should be cheaper to invest long term in government bonds through an IRA than making similar investments through a regular Kupat Gemel or Keren Hishtalmut. Some IRAs require a minimum investment of 100,000NIS. Click here to link to the original Hebrew article.
Tax Cuts or Tax Increases?
How will Congress Solve the US Budget Crisis?
Congress is debating how to reduce the gigantic US deficit. Part of their considerations include: reducing tax rates; but also reducing tax breaks for health care, charitable contributions, and retirement benefits. They are also considering repeal the Alternative Minimum Tax finally. They may also lower corporate tax rates and move to a system that taxes US multinational businesses just on their income from US sources. Time will tell. |
