St. Gallen, 25 August 2009 - Wegelin & Co. is planning a broad retreat from the U.S. capital market. The intended strengthening of the QI regime by the US Government and the extension of the inheritance tax obligations constitute insurmountable problems and considerable legal uncertainties for banks worldwide. "This is untenable, " said Dr. Konrad Hummler, managing partner of the private bank, in his recent Wegelin investment commentary. The Government of the once most vibrant market economy appears unaware of its own Achilles' heel as it allows some of its own to commit worrisome mistakes.

The business model of cross-border assets, at least as far as U.S. persons are concerned, must be revised. Obama's government plans not only to plug all tax loopholes against Americans. Rather, a significant extension is in the pipeline, seeking to tax also non-Americans. First and foremost, the imminent tightening of the IRS’ Qualified Intermediary Agreement entails excessive legal risks for the Swiss Banks. They would have to function even more as an "extended arm of the US. tax authority" and be able to determine who is liable to pay taxes in the US.- an inappropriate and impossible task, given the almost boundless and totally vague definition of effective taxation.

In the future, not only American citizens but also foreigners will be asked to pay the U.S. "Estate Tax". Even a single American title in any bank account will trigger this whole-sale U.S. tax obligation. In many instances practically unnoticable and virtually unnoticed, even a non-American customer can become a U.S.-taxable U.S. person. The dangers are real and would be too great for the banks involved to commit innocent errors with regard to its reporting obligations vis-à-vis the IRS.

The decision to recommend to its account holders to shed all US. securities is also based on the observation that U.S. sources often and boundlessly overestimate the attractiveness of their own financial center. Konrad Hummler thus sees the Obama Administration as victim of a home-made fundamental misconception. For it continues to disregard that its main problems emanate from its gigantic capital needs whose financing is yet to be addressed properly. The investment commentary reminds the reader not only of the size of the U.S.’ world-wide indebtedness (some 600 percent of its GDP), but also of the appalling US-American "self-financing": the heavily indebted public sector is both borrower and creditor at the same time. The usual sources of funding are drying up and the Fed already finds itself compelled to buy half of all the newly issued debt securities. The Fed’s current market medicine entails inflation risks, and the doubts about the US. Dollar grow. The U.S. thus presents itself as a state laboring to keep failing structures in place, while agressively pursuing anti-business policies even beyond its jursidiction – i.e. a picture of an increasingly unattractive has-been great power dragged down by mountains of debts and problems.

The Wegelin & Co. Private investment commentary is published since 1909. The commentary appears seven times a year with a circulation of more than 70,000 copies. It is written by Dr. Konrad Hummler, Managing Partner with unlimited liability of Wegelin & Co. The commentary is available in print version (pdf) and podcast on www.wegelin.ch.

For more information: Dr. Albena Björck, Head of Corporate Communications
Phone (direct): +41 71 2425821, E-mail: Albena.Bjorck@wegelin.ch

[unauthorized translation of Wegelin Pressemitteilung
courtesy by: Swiss Investors Protection Association - url: www.solami.com/wegelin265pr.htm | .../QIdetails.htm]

opentubes,
It's useful information for non-US people. Not investing money in the US or selling off US assets is not fraud. The US tax authorities have no right to go beyond their own borders.

ObfuscatedPerlParadx
Actually, the US government does have that right. It was granted to them by the Swiss government.