Global Financial Integrity

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Tax Havens, Evasion to be Targeted by European and U.S. Lawmakers in Year Ahead

Monique Perry Danziger, +1 202 293 0740 ext. 222
Global Financial Integrity
Monique Perry Danziger, +1 202 293 0740 ext. 222

WASHINGTON, DC – In the wake of a tax evasion scandal which has led to calls for increased transparency and tighter regulation of cross-border capital movement within the European Union, Global Financial Integrity applauds efforts by U.S. legislators to enact legislation which would keep the U.S. apace of its European counterparts.

“Tax evasion deprives the U.S. of more than $100 million dollars in uncollected revenue every year,” said GFI director Raymond Baker.  “Money that is needed to pay for things like healthcare, education and infrastructure is flowing abroad to offshore and secrecy jurisdictions.  It is time to tackle this illegal and detrimental practice.”

As a result of Europe’s historic crackdown on tax havens and evasion, two bills introduced in the Senate last year have gained momentum towards passage.

S. 396, introduced by Sen. Byron Dorgan, D-N.D., would prevent American companies from deferring the imposition of a second layer of tax on their foreign-source income if they operate in selected low-tax nations. It would amend the Internal Revenue Code to treat certain controlled foreign corporations created or organized under the laws of a tax-haven country as domestic corporations for tax purposes. It would also set forth a list of “tax-haven” countries, and grant the Treasury authority to remove or add a country from the list.

S. 681, the Stop Tax Haven Abuse Act, would establish legal presumptions against the validity of transactions involving offshore secrecy jurisdictions, including foreign tax havens identified in the act, and by the Treasury.  The bill would also allow U.S. tax and securities law enforcement to presume that non-publicly traded offshore corporations and trusts are controlled by the U.S. taxpayers who formed them or sent them assets, unless the taxpayer proves otherwise.

In addition to congressional action, the Justice Department’s Tax Division announced on Tuesday the creation of the National Tax Defier Initiative or TAXDEF.  The purpose of which will be “to reaffirm and reinvigorate the Tax Division’s commitment to investigate, pursue and, where appropriate, prosecute those who take concrete action to defy and deny the fundamental validity of the tax laws,” according to a DOJ news release.

“The robust interest and support for anti-tax evasion legislation is part of a coming sea change in how the world deals with illicit financial flows,” said Baker.  “Moving money surreptitiously across borders and into secret bank accounts fosters all kinds of illegal and dangerous activities.  The changes being proposed within the EU and U.S. have the potential to recover huge sums of national revenue while hindering illicit commerce around the world.”