"History suggests that aggressive measures introduced by the US revenue authority one year are often copied by other jurisdictions in the following years, and that ‘offshore’ financial institutions will be likely to be key targets, irrespective of the conduct of their ‘offshore’ counterparts. This is particularly likely in an economic downturn," BakerPlatt observed in a commentary on the investigation, entitled ‘Tax Haven Banks and US Tax Compliance’, which is being carried out by the US Senate Subcommittee on Investigations, part of the Committee on Homeland Security & Governmental Affairs.

"The ramifications for all ‘offshore’ financial institutions may, therefore, be significant, particularly in those jurisdictions which, like Switzerland, have banking secrecy laws rather than the more widely accepted rules on banking confidentiality. Without being able to ensure secrecy, banks in ‘secrecy’ jurisdictions may lose one of their strongest selling points," the firm added.

BakerPlatt also expressed alarm at the vehemence of the key lawmakers involved in the hearing, including subcommittee chairman Carl Levin, who in his opening remarks to the Senate hearing on the issue last month, accused the 50 'tax havens' operating in the world today of engaging in "economic warfare" with the United States. "Their twin hallmarks are secrecy and tax avoidance," Levin remarked.

It is said that the US Treasury loses in the order of USD100bn as a result of offshore tax evasion, prompting Sen. Norm Coleman, the senior Republican on the subcommittee, to use equally scathing language against some offshore banks, describing them as "Al Capone safe houses for evading taxes."

A report published by the subcommittee prior to the hearing singled out the activities of Swiss bank UBS, which is accused of helping US clients dodge taxes by allowing some clients to flout US tax reporting rules, and Liechtenstein's LGT bank, which stands at the centre of a global offshore tax evasion scandal which ignited after a former employee sold confidential client data to the German authorities.

The Committee has made a series of recommendations aimed at increasing disclosure and strengthening enforcement, and, if implemented, BakerPlatt warns that they could have "far reaching implications."

"The tone of the report is unfortunate in its sweeping condemnation of offshore ‘tax havens,'" the firm noted.

"Many compliant institutions and jurisdictions will feel unwarranted pressure as a result of some of the pugnacious comments aired in the report and by some of its authors," the commentary warned.