Over the past year there have been numerous stories about the IRS seeking to collect information about U.S. taxpayers, with funds secreted in off-shore accounts, who may have not be paying their “fair share” of taxes. In fact, IRS tax attorneys say that while the agency is aggressively taking action against Americans using off-shore banks to hide their money from the IRS, the United States has become a huge haven for foreign tax evaders.
Robert Goulder, Editor and Chief of U.S. Tax Notes International, says “we’ve become the biggest tax haven in the world.” He went on to explain, “People joke about the Cayman Islands. The biggest haven is an island, alright. It’s either Manhattan or Great Britain.”
The problem is best illustrated, according to tax lawyers, by noting that large banking institutions woo the rich and entice them to deposit with the promise of keeping their money safe and secret. Jack Blum, a former U.S. Senate Investigator and expert on off-shore tax shelter practices, claims American bankers “sell tax evasion to citizens of Central America, the Caribbean, all over Latin America.” A U.S. Department of Commerce study revealed an estimated 3.6 trillion dollars in U.S. Banks and securities firms deposited by foreigners.
As one might expect, American bankers vehemently deny they either entice or enable tax evasion by citizens of foreign countries. The President of the Florida Bankers Association, Alex Sanchez, claims Latin American citizens move their money to American banks not to evade paying taxes, but rather to keep their money safe from tyrants and kidnappers and/or other criminal elements. Tax attorneys point out that historically, however, results from investigations over the past fifty (50) years suggest much of the money in American Banks comes from Third World dictators and drug cartels seeking to launder money through U.S. Banks.
So while the IRS has been working diligently to reduce tax havens in other countries (i.e. Cayman Islands and Switzerland), the U.S. Banks are providing tax havens to foreign depositors and helping them avoid paying taxes in their own countries. In other words, what’s good for the goose is not good for the gander.
Tax attorneys believe the IRS’s focus on off-shore accounts will continue to increase. They also feel that efforts to collect back taxes from U.S. citizens depositing funds abroad will not slow down, particularly while the U.S. government is experiencing budgetary short-falls and is being forced to make undesirable cuts in programs. Tax lawyers also note foreign bank account reporting requirements (FBAR) are coming due in June, and U.S. taxpayers who fail to comply will likely be hit with large penalties and interest on the outstanding back taxes owing.
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