Offshore Tax Evasion – Commentary

by David Richardson

Gary Wolfe, Esq. has recently published a number of articles that highlight increasing focus and scrutiny on offshore structures. With the article “Offshore Tax Evasion: File Leaks Expose Secrets of the Rich” I offered comments that put the reporting in question in proper perspective; that is, that not all those offshore are guilty of tax evasion and having undeclared assets. The following commentary speaks to not just the problems of offshore or international planning, but also to the issues associated with the potential solutions.

Clearly for non-compliant taxpayers, le jeu est fini.

Information is starting to flow and it will at once be both bilateral and shared globally. Clients that are not compliant need to get themselves straight and for those who are not yet international (read; offshore), they need to do so to a higher standard than in past. The problem is that people are generally looking for less complicated and/or inexpensive solutions, but as the problems and environment become more complex so do the solutions. That said, the cost of good advice and planning done up front, is certainly less costly than the potential cost of non-compliance down the road.

The IRS’s “Jon Doe” Summons served on First Caribbean Bank of Barbados, demonstrates that in the context of the US in the wake of the mammoth UBS disclosure, the IRS is continuing its efforts to uncover and prosecute tax fraud. For taxpayers who have made mistakes in the underreporting of income and/or the failure to disclose offshore accounts, the problems are twofold; one, the mistakes they have already made and two, the ones they may yet make. Doing nothing is not an option. And worse, taking steps to attempt to further obfuscate what has been done, invites the potential specter of money laundering which itself has serious issues and penalties- both civil and criminal. But for those taxpayers willing to come clean Mr. Wolfe himself can speak to the potential pitfalls.
Being at the forefront of this complex area of tax law, he can attest to the fact that there is a wide gamut of bad, good and better advice available to clients. This is a highly complicated process that requires the type of expertise that few practitioners possess.

In the US, the so-called Offshore Voluntary Disclosure (“OVD”) program is one option favored by some to resolve matters with the IRS vis-a-vis undeclared offshore accounts. As Mr. Wolfe pointed out in his newsletter of March 2013, there is a very substantial downside potentially to taxpayers who use this program and that other strategies may be more suitable depending on their specific fact pattern. The OVD has its place but so too do other opportunities for clients to eliminate the possibility of criminal proceedings while bringing past tax fillings and disclosures up to date. Again, Mr. Wolfe and a select few can guide clients through the options and advise on the best choices. But they are not here to act as missionaries and to convert the unrepentant. Clients must have a genuine interest in doing the right thing and paying not only what is owed the Government but also the fees that are required to remedy the situation. For those not fully committed, they needn’t waste others’ time.

In the current age of fiscal puritanism which many governments and societies are now embracing, it is no longer chic to speak in hushed tones at a cocktail party of an undeclared Swiss bank account as some kind of boast or dirty secret. Rather, speaking now of “cards-up” planning that is fully tax compliant, while perhaps not riveting, it is neither some ignominious badge of dishonor.

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