I lifted my nose up from filing Foreign Bank Account Reports (FBARs), talking to clients with offshore financial accounts, and filing for tax amnesty under the IRS Offshore Voluntary Disclosure program long enough to notice a speech that Senator Carl Levin had given in mid-September on the topic of offshore tax havens. Senator Levin has been battling against tax fraud committed through the use of offshore financial accounts for many years, and in the last year or two his ideas have been gaining more traction. The text of his speech is available here. A few highlights are worth repeating:
• Liechtenstein and Switzerland have reversed decades of resistance and agreed to enter into Tax Information Exchange Agreements in line with the model agreement developed by the Organization for Economic Cooperation and Development (OECD). Both countries have already initialed such agreements with the United States and other countries.
• G-20 leaders signaled a new willingness to take action against uncooperative tax havens, the changes made by Liechtenstein and Switzerland set off a chain reaction in other bank-secrecy nations. Places like Luxembourg, Austria, Andorra, Monaco, and others also pledged for the first time to share tax information and cooperate with international tax enforcement
• Offshore tax abuse needs to be taken into account when developing international trade policy. Specifically, there ought to be a policy against rewarding trading partners that refuse to adopt the growing global consensus against tax evasion. The nation of Panama, for example, hopes to conclude a free trade agreement with the United States in the near future. But at the same time, after pledging in 2002 to negotiate a tax information exchange agreement with the United States, Panama is stonewalling. The United States should insist that Panama and other nations agree to tax information sharing before extending to them the advantages of a free-trade agreement.
Clearly the pressure is mounting on secrecy jurisdictions, and as I have said before whether your offshore account information will find its way to the IRS immediately is unknown, and unknowable. Nevertheless the handwriting is on the wall, and in five or ten years from now the ability to commit tax fraud by hiding funds in an offshore bank account will probably be a quaint curiosity that you can tell your grandchildren about.
If you would like advice and assistance from our former IRS tax lawyers call Brager Tax Law Group, A P.C. to arrange a consultation.