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The following is a statement of Ryan Pierannunzi, Tax and Budget Associate with U.S. PIRG, on the settlement announced today between UBS and government regulators over the Libor scandal in which UBS and other financial institutions are accused of unlawfully tampering with interest rates. Along with agreeing to this settlement, UBS admitted to charges of fraud. The total settlement amount is $1.5 billion, of which $1.2 billion will be paid to U.S. agencies.
“We call on the IRS to forbid the bank from writing off this settlement as a tax deduction. Doing so would shift millions of dollars of the penalty onto taxpayers. UBS should be held fully accountable for its wrongdoing and taxpayers should be protected from picking up the tab.”
“While we applaud the Justice Department for ensuring that UBS will not be able to deduct their $500 million portion of this settlement, no such provision was included for the $700 million portion that will be paid to the Commodities Futures Trading Commission. Unless the IRS prevents it, then UBS can write off this sum as a tax deduction and reduce its future tax bill by as much as $245 million.
“$245 million is quite a hidden bank fee. Every dollar that UBS avoids paying in taxes as a result of deducting this settlement, would be lost revenue that the public will be forced to make up for through cuts to public services, higher taxes, or an increase in our national debt.”
“If UBS takes a $245 million tax benefit, then the result of today’s settlement would fall from $1.2 billion down to a net transfer of $955 million paid to the U.S. Treasury.”
“This settlement is meant to address the wrongs that UBS has committed. We don’t think that the U.S. should allow UBS to treat the settlement costs as a normal business expenses. It sends exactly the wrong message to say that fraud is just part of doing business.”
“With the debate over how to address our deficit raging, American taxpayers can ill-afford to be stuck with a bill – potentially hundreds of millions of dollars – to help UBS offset the costs incurred from illegally rigging rates.”
“Allowing UBS to write off part of this settlement as a normal business expense would add insult to injury. When a company like UBS negotiates a tax-deductible settlement for its destructive wrongdoing, the public loses four times over. First, the public suffers the direct impact of corporate wrongdoing. Second, taxpayers are forced to shoulder part of the amount of the penalty because the public must cover the cost of the forgone revenue. Third, future deterrence of corporate wrongdoing is weakened. And fourth, the absence of a trial eliminates opportunities for a public airing of evidence about corporate misdeeds and the lax regulations that can lead to them.”
A 2012 report by U.S. PIRG on the tax deductibility of costs from corporate wrongdoing can be found here.
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