With an estimated $40 to $70 billion in taxes lost each year because of tax havens, the Senate Homeland Security and Governmental Affairs Committee was naturally quite interested in plugging this hole. Yesterday the panel heard testimony from IRS Commissioner Mark Everson, among others.
The 401-page report issued by the committee The report recommends eight items:
1. U.S. law should presume that offshore trusts and shell corporations are under the control of the Americans directing the use of the assets, when the trusts and shell corporations are located in a jurisdiction designated as a tax haven.
2. U.S. publicly held companies and their insiders should disclose in SEC filings holdings in an offshore trust or corporation.
3. Offshore trust or shell corporations related to a director, officer, or large shareholder of a U.S. publicly traded corporation should treated as an affiliate of that corporation.
4. Require 1099 reporting if a US financial institution opens an account for a foreign trust or shell corporation and determines that the beneficial owner of the account is a
U.S. taxpayer.
5. Loans that are treated as trust distributions under U.S. tax law should be expanded to include loans of real estate and personal property of any kind including artwork, furnishings and jewelry. Receipt of cash or other property from a foreign trust, other than in an exchange for fair market value, should also result in treatment of the U.S. person as a U.S. beneficiary.
6. Require hedge funds to establish anti-money laundering programs and report suspicious transactions to US law enforcement.
7. Enact laws and/or regulations such that taxes on stock option compensation cannot be avoided or deferred by exchanging stock options for other assets of equivalent value such as private annuities.
8. Enact sanctions on tax havens that do not cooperate with US tax enforcement and eliminate US tax benefits for income attributed to those jurisdictions.
Given that both Democrats and Republicans want to reverse this outflow, expect something to pass Congress in the not to distant future.
New York Times Article
AP Report
Wall Street Journal Article (Paid Subscription Link)