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The following is a statement of Ryan Pierannunzi, Tax and Budget Associate with U.S. PIRG, on the anticipated upcoming settlement between UBS and government regulators over the Libor scandal in which UBS and other financial institutions are accused of unlawfully tampering with interest rates.
“With news reports emerging that UBS will soon reach a settlement with regulators over its role in the Libor scandal, we’re calling on the federal government to bar the bank from pushing hundreds of millions of dollars in costs onto taxpayers by writing off the settlement payment as a tax deduction. UBS should be held fully accountable for its misdeeds and taxpayers should be protected from picking up the tab.”
“Unless the Justice Department and other involved agencies prevent it, the bank would be able to shift a significant portion of the settlement costs onto taxpayers. With an anticipated settlement expected to exceed $1 billion dollars, allowing deductibility could save UBS hundreds of millions of dollars in tax writeoffs. The lost revenue would have to be made up for elsewhere with cuts to public services, higher taxes, or an increase in our national debt.”
“This settlement is for wrongs that UBS has committed. We don’t think that the U.S. should allow UBS to treat these costs as a normal business expense. It sends exactly the wrong message to say that illegal manipulation of markets is just part of doing business.”
“If a billion dollar settlement was to be paid wholly to U.S. authorities, then the potential effect of allowing the settlement to be written off as a tax deduction could reach $350 million. To the extent that portions of a settlement would be paid to other countries, the budget impact of tax deductibility for U.S. taxpayers would be lower.”
“Regulators should model any agreement with the bank on the settlement the Department of Justice reached with BP in November, which barred the company from claiming any part of the settlement costs as tax deductible.”
“With the debate over how to address our deficit raging, American taxpayers can ill-afford to be stuck with a bill to help UBS offset the costs of rigging rates.”
“When a company like UBS negotiates a tax-deductible settlement for its misdeeds, 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 forgone revenue by raising tax rates, cutting public programs, or adding to the national debt. 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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