tax breaks from Bush to lure them back on shore, they have greedily taken that tax breaks and still bank offshore to avoid taxes. Is that same favoritism from Bush Republicans also mean IRS is not following through on busting offshore banking M[/color]
IRS Says Offshore
Tax Evasion Is Widespread
By David Cay Johnston
Originally published New York Times March 26, 2002
The I.R.S. said yesterday that Americans in far greater numbers than it had once thought were evading taxes by secretly depositing money in tax havens like the Cayman Islands and withdrawing it using American Express, MasterCard and Visa cards. The I.R.S. said its estimate that one million to two million Americans might be using such accounts was based on records that it had obtained by summons from MasterCard of 230,000 bank accounts in three tax-haven countries.
A prominent criminal tax lawyer, Elliott H. Kajan of Beverly Hills, Calif., said, however, that the estimate was so out of proportion that he doubted it would hold up.
But the Internal Revenue Service said that from records of purchases, it had already identified hundreds of income tax cheats, including executives of publicly traded companies, business owners, doctors, lawyers and investment professionals. These people — most believed to have incomes that would put them among the top 1 percent of taxpayers — "are using offshore cards to pay for living expenses," the I.R.S. said, from groceries to cars to college tuition for their children.Offshore accounts would be of little use to people whose wages are reported to the I.R.S. by their employers. But entertainers, business owners, investors and others who control what is reported to the I.R.S. can use offshore accounts to hide fees, profits, dividends, interest and capital gains.
Setting up such accounts has become a popular practice among a number of financial institutions that provide services to affluent individuals. Joseph C. West, the revenue agent running the investigation, said in an affidavit that he had found dozens of companies using the Internet to solicit people who want to hide money. Among companies the I.R.S. identified in court papers as advertising offshore banking secrecy were KPMG, the big accounting firm, and three big banking companies — Barclays, HSBC and Royal Bank of Canada. Officials at KPMG and HSBC did not return calls last night. Representatives of Barclays and the Royal Bank said they could not locate someone knowledgeable on the issue.
A senior I.R.S. official said many of those with the offshore accounts may have been seeking to hide income and assets from a spouse, especially in divorce, or from creditors, including plaintiffs in lawsuits. Tax evasion, she said, was an unavoidable byproduct of these strategies.
The commissioner of internal revenue, Charles O. Rossotti, said the I.R.S. was determined to be more aggressive going after Americans who use such accounts to avoid taxes.
"For years people assumed we wouldn't be able to find them," Mr. Rossotti said. "Simply put, the guarantee of secrecy associated with offshore banking is evaporating."
In October 2000, the I.R.S. sought credit card records of accounts of MasterCard and American Express in Caribbean tax havens that routinely showed charges in the United States. At the time, prominent tax experts said they assumed that at most tens of thousands of Americans had such accounts. The I.R.S. made its estimate based on the market share of MasterCard, which is much smaller than Visa in the international credit card business, and the estimated volume of business done in three dozen tax-haven countries.
Several lawyers said yesterday that they were astounded by the new I.R.S. estimate of the extent of the conduct, which was included in papers filed in federal court in San Francisco. Katherine Kneally, a criminal tax lawyer in New York who heads an American Bar Association committee on tax penalties, said the estimate of such widespread cheating sent a dark message about the income tax system, which depends on individuals' voluntarily determining how much they owe and filing honest tax returns.
"It says that the I.R.S. has drifted from its mission," Ms. Kneally said. "It says that the message of deterrence is not out there."
The I.R.S. audits only about one in 160 income tax returns. It devotes few resources to identifying those who do not file tax returns: of several dozen individuals and businesses named in The New York Times in recent years as not filing tax returns, only two said that they had been audited. Many of the offshore account holders identified by the I.R.S. did not file income tax returns, the agency said, while others filed, but failed to report their offshore account.
IRS Says Offshore Tax Evasion Is Widespread - Nations and States - Global Policy Forum