Panama Papers Update – OECD

In a major development the Paris based Organization for Economic Co-operation and Development (OECD) confirmed on 6/28/17 (Financial Times) that the resulting uproar and political pressure from the Panama Papers has lead to all uncooperative tax havens agreeing to commit to international transparency reporting standards (known as CRS i.e. Common Reporting Standards). These new agreements commit the over 80 tax havens worldwide to exchange tax information on request and commit to automatic information exchange.

Starting in September 2017 worldwide countries and financial centres will send to Foreign Tax Authorities details of client Bank balances, interest, dividends and income from insurance products. The only non-participating country is Trinidad/Tobagos judged too small to matter.

The ramifications are still unknown but it appears that foreign shell companies (held in offshore tax havens for secrecy and maintained with anonymous owners) may now have a complete disclosure of their financial details sent to relevant Tax Authorities worldwide. Ironically, the US, which spearheaded disclosure of offshore holdings with the 2010 Foreign Account Tax Compliance Act, known as FATCA, is not committing to join the CRS preferring to exchange financial information under FATCA (which is considered to have lesser disclosures required than CRS).

In the words of the international Tax Justice Network, Alex Cobham, Chief Executive: “The US is the elephant in the room. If you are going to produce a tax haven blacklist with one member it would not be a small Caribbean country, it would be Tax Haven USA”. Disclosures subsequent to the Panama Papers, confirm that in recent years multiple US states (Delaware, Wyoming, South Dakota, Nevada) have been the recipient of billions of dollars of wealth, repatriated from offshore tax havens “hiding in plain sight” in the US behind State formed anonymous companies whose beneficial owners remain undisclosed.

More troubling is the apparent huge failure of the three different IRS Offshore Voluntary Disclosure Programs since 2009 to collect taxes due on undisclosed offshore accounts (reputed to hold trillions of dollars in assets for wealthy Americans in up to 10m separate accounts).

Since 2009, the IRS has collected $9.9 B from 55,800 taxpayers while being aware that up to $184B per year is being not paid for federal, state and local taxes from these “wealthy American tax cheats” who hide their assets offshore behind anonymously owned companies. In comparison, the OECD reports that during the same 8-year period (2009-2017), their commensurate worldwide tax amnesties have collected over 85 Billion Euros (nearly $97B US) from more than 500,000 taxpayers who disclosed their unreported offshore assets and paid tax.

So the major question: Why does the OECD collect nearly 10x the amount of taxes from nearly 10x the amount of taxpayers under the similar amnesty that the IRS has instituted which such paltry results. Who is being protected? Why?

These questions need to be addressed by the IRS, and those in Congress (Congressman and Senators) who do not view tax cheating as a “sport” but as a serious crime (or crimes). Tax evasion is a felony. It is just not unpatriotic it has been analogized by the US Supreme Court as an “embezzlement from the national treasury” (See 2005 Case, Pasquantino). The same very wealthy Americans who prosper from the magnificent benefits of being Americans, turn around and hide their assets and income offshore, commit tax evasion and instead of being criminally prosecuted as unpatriotic tax cheats are allowed to keep their ill gotten tax-cheating gains while living in their multi-million dollar homes, flying on their private jets and traveling the seas on their private yachts.

Why is “tax treason” allowed? Who is willing to face the fact: the richest Americans who owe the most to our great country are bankrupting the nation, states and cities by cheating on their taxes by not declaring their offshore assets or income while the IRS limply fails to enforce tax collection? This does not appear to be what the Founding Fathers had in mind for our terrific democracy when in the Declaration of Independence they granted an American birthright to Life, Liberty and the Pursuit of Happiness.

Comments are closed.