Politics

Obama's Battle Against Offshore Tax Evaders Showing Positive Results

| by Kathryn Schroeder
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The Obama administration has made great progress in their crackdown on offshore tax evaders.

The efforts by the Internal Revenue Service (IRS) under the Obama administration to thwart the hiding of assets offshore have been a “string of victories," The Hill reports.

The Swiss bank BSI agreed to pay a $211 million penalty to the United States last week. This marks the first financial institution to reach an agreement under a Justice Department program targeting secret offshore accounting.

Credit Suisse bank in Switzerland entered a guilty plea last year and agreed to pay a $2.6 billion penalty. UBS bank, also in Switzerland, paid a $780 million settlement in 2009 and agreed to release the names of roughly 4,400 American account holders, many of whom pleaded guilty or were convicted. 

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The total that Swiss banks have now paid for assisting tax evasion is nearly $4 billion.

The Foreign Account Tax Compliance Act (FATCA), signed into law by Obama in 2010, compels foreign banks to deter U.S taxpayers from hiding income offshore.

There is also a voluntary disclosure program for Americans with offshore accounts that the IRS is administering. To date, it has brought in more than 50,000 taxpayers and recovered $7 billion in taxes, penalties, and interest.

“The risk calculus for an American to hide money somewhere has changed dramatically from where it was 10 years ago. Dramatically,” Scott Michel, who works in offshore tax issues with Caplin & Drysdale, told The Hill.

Expats are also feeling the changes that have occurred.

“Talk to any of them and they will tell you that there is a changed environment,” a financial industry lobbyist told The Hill. “Americans really can’t easily or casually park their money outside the U.S.”

The available information on how successful government efforts have been to find offshore tax evaders is not entirely accurate because it is impossible to know how many people have a secret account in another country, The Hill reports.

“I think, honestly, it’s hard to come up with a good objective measure for something like this,” said John Harrington, a former international tax counsel at the Treasury.

A spokeswoman for the Treasury said FATCA is “the global standard” in battling tax evasion, and Treasury officials believe it will only add to the amount of revenue that the government collects from tax evaders.

There are roughly 110 countries, apart from the U.S., and 160,000 financial institutions, who have agreed to comply with FATCA. The law requires that foreign banks report on U.S. accounts.

If someone wants to try and evade taxes, they will find a way to do it, said a financial lobbyist. He mentioned Panama, Russia, and China as possible alternatives to Switzerland for a tax haven.

Panama and China have signed FATCA agreements with the U.S.

Sources: The Hill 

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