Three Senators have introduced the “Stop Tax Haven Abuse Act.” Senators Carl Levin (D-MI), Norm Coleman (R-MN), and Barack Obama (D-IL) are targeting the 30+ offshore tax havens. Senators Levin and Coleman have led an investigation into these tax havens, and believe they shelter $100 billion in annual tax losses to the U.S. Treasury.
“It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars in assets from taxation,” said Coleman. “These tax schemes cause a massive revenue shortfall and, sadly, it is the honest American taxpayer who must bear a disproportionate burden of investing in areas like education and healthcare. We are introducing this bill to close these loopholes, shut down offshore tax schemes, and ensure that every American pays their fair share of taxes.”
I expect this bill has a good chance of passage this year. It may end up being tied to this year’s AMT relief act (whenever that’s introduced). The press release (from Senator Levin) lists the goals of the bill (available below).
Among other measures, the 68-page bill would:
• ESTABLISH PRESUMPTIONS TO COMBAT OFFSHORE SECRECY by allowing 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;
• IMPOSE TOUGHER REQUIREMENTS ON U.S. TAXPAYERS USING OFFSHORE SECRECY JURISDICTIONS by listing 34 jurisdictions which have already been named in IRS court filings as probable locations for U.S. tax evasion;
• AUTHORIZE SPECIAL MEASURES TO STOP OFFSHORE TAX ABUSES by giving Treasury authority to take special measures against foreign jurisdictions and financial institutions that impede U.S. tax enforcement;
• STRENGTHEN DETECTION OF OFFSHORE ACTIVITIES by requiring U.S. financial institutions that open accounts for foreign entities controlled by U.S. clients, open accounts in offshore secrecy jurisdictions for U.S. clients, or establish entities in offshore secrecy jurisdictions for U.S. clients, to report such actions to the IRS;
• CLOSE OFFSHORE TRUST LOOPHOLES by taxing offshore trust income used to buy real estate, artwork and jewelry for U.S. persons, and treating as trust beneficiaries those persons who actually receive offshore trust assets;
• STRENGTHEN PENALTIES on tax shelter promoters by increasing the maximum fine to 150% of their ill-gotten gains, and on corporate insiders who hide offshore stock holdings by increasing the maximum fine on them to $1 million per violation of U.S. securities laws;
• STOP TAX SHELTER PATENTS by prohibiting the U.S. Patent and Trademark Office from issuing patents for “inventions designed to minimize, avoid, defer, or otherwise affect liability for Federal, State, local, or foreign tax”; and
• REQUIRE HEDGE FUNDS AND COMPANY FORMATION AGENTS TO KNOW THEIR OFFSHORE CLIENTS by requiring them to establish anti-money laundering programs like other U.S. financial institutions, under regulations to be issued by the Treasury Department.
Though this legislation targets the securities industry and the offshore trust industry, at least one other industry will be impacted by this bill (should it pass Congress): the offshore gambling industry. The Isle of Man and Gibraltar are two of those offshore tax havens, and they happen to be two of the main domiciles of offshore gambling firms. Depending on the actual text of the legislation (the bill is not yet available on the Thomas system) and any regulations promulgated by its passage, Americans might have even more difficulties in getting funds from the U.S. to the offshore gambling firms.
Thanks to the TaxProf Blog for the heads-up.
This entry was posted on Monday, February 19th, 2007 at 10:56 am and is filed under Legislation. You can follow any responses to this entry through the RSS 2.0 feed.
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