Consumer advocates applauded Tuesday a unique clause hidden in the Department of Justice’s tax-evasion settlement with Credit Suisse that prevents the global banking giant from taking a tax write-off for its massive penalty.
Buried in the settlement with Credit Suisse, announced formally Monday night after weeks of speculation, is a clause that pleased public interest groups. The language prevented the Swiss bank from taking, directly or indirectly, and tax deduction, credit or any other offset against the huge $2.6 billion settlement it will pay as part of the plea agreement with the DOJ and bank regulators.
“This stipulation protects taxpayers. We call on the Justice Department to make it a standard practice,” Phineas Baxandall, a senior tax analyst for the U.S. Public Interest Research Group, said in a statement.
Although the bank agreed to pay $2.6 billion, roughly $1.33 billion was in fines and penalties that would have been difficult to deduct. Another $667 million must be paid as restitution to the Internal Revenue Service. Preventing a deduction from this sum alone, said Baxandall, will save taxpayers about $233 million.
“When companies write off settlements for wrongdoing as a tax deduction, ordinary taxpayers end up picking up the table, either in the form of higher tax rates to make up for lost revenues, cuts to public programs or higher national debt,” he said.
Bills in the House of Representatives and Senate seek to end the practice of businesses taking a tax write-off when settling cases with penalties and fines.
Credit Suisse late Monday acknowledged what had been made abundantly clear in a Senate hearing earlier this year_ that it for years had helped Americans flaunt U.S. tax laws and squirrel their money away in secret Swiss bank accounts.
The Justice Department did not highlight the special clause prohibiting tax write-offs for the settlement, but it was widely criticized for lacking such a clause in settlements with big U.S. banks and BP after its dreadful oil spill that fouled beaches across much of the U.S. portion of the Gulf of Mexico.