Senator Carl Levin (D-MI) and others introduced the Stop Tax Haven Abuse Act on Monday. The Act targets financial transactions into (or out of) jurisdictions that are considered to be tax havens.
Senator Levin has posted a summary of the legislation. Given that I expect many Republicans to support this measure I think it has a good chance of passage.
There’s some interesting language in the bill, and online gambling may end up impacted by this. Many of the online gambling sites are located in tax havens, including the Isle of Man, Gibraltar, Malta, Costa Rica, and Antigua and Barbuda. The Act states the following for Transfers of Income:
Transfers of income – In a tax proceeding, any amount or thing of value –
* a) transferred to a U.S. person (other than a publicly-traded corporation) directly or indirectly from an account or entity in an Offshore Secrecy Jurisdiction, or
* b) transferred from such a U.S. person directly or indirectly to an account or entity in an Offshore Secrecy Jurisdiction, will be presumed to represent previously unreported income to the U.S. person in the year of transfer.
So if you’re not keeping records, everything moved to or from an online site would be considered income unless you could prove otherwise.
Additionally, the FBAR (foreign financial account reporting) would be strengthened. “Presumption is that any account in an Offshore Secrecy Jurisdiction contains funds sufficient to trigger this reporting requirement.” So all online gambling accounts would have to be reported in any of these countries.
There’s a lot in the act, and quite a bit of it is laudable. As the recent Swiss escapades have shown, there’s plenty of tax haven abuse occurring. Unfortunately, online gambling may get caught in the crossfire.
The TaxProf Blog has links to news commentary on the proposed legislation. Additionally, on Wednesday there will be a hearing on the Swiss tax scandal in Washington.