Tax Amnesty Scheme
October 11, 2009 by Chinatex
In March of this year, the IRS came up with a program similar to the guns for cash program popular in many U.S. states. This time, instead of turning in an old rusty handgun or rifle – for cash (mind you we didn’t have this program in Texas), individual taxpayers with offshore accounts could voluntarily disclose these accounts to the IRS in exchange for amnesty (not cash), as set forth by the IRS as follows: Under the special provisions issued in March, taxpayers with these accounts originally had until Sept. 23, 2009, to come forward. Those taxpayers who do not voluntarily disclose their accounts by Oct. 15 face harsh civil penalties, where applicable, and possible criminal prosecution. Here are two sections from the IRS’ website concerning voluntary disclosure with my comments:
Q2. What is the objective of these steps?
A2. The objective is to bring taxpayers that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws. The objective is to get more money because we are broke and cannot print anymore without risking the dollar becoming worthless. Additionally, the information gathered from taxpayers making voluntary disclosures under this practice will be used to further the IRS’s understanding of how foreign accounts and foreign entities are promoted to United States taxpayers as ways to avoid or evade tax. Further the IRS’s understanding?? This is like the government hiring criminals to tell them how to catch criminals. Data gathered will be used in developing additional strategies to inhibit promoters and facilitators from soliciting new clients. Data gathered will be used to strongarm citizens and financial institutions into paying high taxes to fund government debt and expansion.
Q3. Why should I make a voluntary disclosure?
A3. Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Because it enables them to become compliant – what kind of answer is this??? They are threatening criminal prosecution where none really exists. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution.
For more nonsense from the IRS here is the link to the relevant part of their website concerning this issue:
http://www.irs.gov/newsroom/article/0,,id=210027,00.html
Check out Question 12 where it talks about how to figure out how to pay the back taxes owed. Now Old Chinatex likes how the Brits call things a scheme. In Texas we consider a scheme to be something fishy that we don’t want to get involved in. Looks like the IRS didn’t get enough people to take part in their scheme so they are extending the deadline to turn in your guns and then pay them lots of money. Sounds schemy to me. Here is an excerpt from a recent article in the Hong Kong English language newspaper. It’s relevant because as you might remember from Chinatex’s blawg entitled Tax Man Cometh Part II http://chntxlaw.com/2009/06/tax-man-cometh-part-ii/ the U.S. government recently tried to force Hong Kong and Macau banks into disclosing account holder information. As I told y’all China told em no and it should stay that way as long as China continues to hold almost a trillion dollars of our worthless currency.
Americans in HK rush to beat this week’s tax deadline
Nick Westra South China Morning Post Oct 12, 2009
Americans living in Hong Kong are rushing to ensure their tax affairs are in order ahead of Thursday’s deadline for them to voluntarily disclose unreported income in offshore accounts. The US government is casting its shadow across the Pacific and stepping up efforts to catch tax cheats and expand overseas enforcement.
The so-called amnesty scheme was initiated earlier this year by the US Internal Revenue Service (IRS) following a UBS settlement over allegations of abetting tax evasion. The programme was designed to gather information that would widen an ongoing investigation into a suspected web of wealthy tax cheats. But many ordinary Americans have been caught out as well because they were either unaware of stringent US tax-filing requirements or completed them incorrectly.
In addition to paying local taxes, the 60,000-plus Americans living in Hong Kong must regularly declare their earnings to the IRS. They are allowed an exclusion of as much as US$91,400 in locally earned income for 2009 if they can prove they spent most of the year abroad. But they must complete a filing regardless of whether they are under the threshold or not. US citizens must also report whether the combined value of their personal overseas bank accounts, or even those for which they have signatory power, has exceeded US$10,000 at any time in a given year.
Robert Keys, a partner at PricewaterhouseCoopers (Hong Kong) said: “There is an incredible amount of additional complication that affects the tax filing for an American living abroad. The foreign issues on a return are much more complex than those for a typical guy sitting in San Francisco.”
This is because the IRS has pledged to tighten its enforcement of international taxation amid growing suspicions that wealthy Americans have been exploiting loopholes in foreign tax codes and been stashing cash overseas. Those fears were fanned in February when UBS struck a US$780 million settlement with the US government to avoid facing charges of assisting wealthy Americans with tax evasion.
Highlighting the gravity of the allegations, the Swiss bank also broke from the centuries-old banking tradition of guarding customer secrecy and identified some clients who may have been involved. The number of named clients has since reportedly expanded to more than 4,000. But the IRS’ push to beef up its overseas presence is not just a reaction to recent events. It is also part of a long-term effort to adapt to an increasingly global business environment.
In its Strategic Plan 2009-2013 released in April, the IRS said some taxpayers may be dropping off the radar as more wealth shifted overseas. It estimated that the percentage of US citizens’ income coming from abroad had doubled from 2001 to 2006 and that the number of multinational firms worldwide had increased by 20 times to 63,000 since 1990. The IRS also published an announcement that month entitled “Reaching out to Americans abroad”. It said there were 7 million US citizens living overseas and included information for them to learn more about tax requirements.
The growing reach of the IRS was something that Americans living abroad must take note of, said Richard Weisman, a tax partner at Baker & McKenzie in Hong Kong. “While the basic US tax laws themselves have not materially changed, the tax enforcement climate in the US has totally changed in the last year or so,” Weisman said.
The US economy has been battered by the global downturn and is facing slower growth and mounting debts. Its budget deficit for the financial year climbed to a record US$1.38 trillion in August and unemployment has ballooned to a 26-year high. Against this backdrop, the US government has eagerly pumped more resources into the IRS in the hope that it can collect more revenue to fill the coffers. US President Barack Obama outlined a plan in May which he said would recoup US$210 billion over the next decade in part by hiring 800 new IRS agents for overseas assignments.
The growing footprint of the US taxman has sparked consternation among Americans overseas given the IRS’ harsh rhetoric in the wake of the UBS settlement. Keys said: “People don’t want the IRS to put their financial affairs under a spotlight, whether they are completely compliant or not.”
The growing footprint of the taxman is right!!! There are legal ways to avoid paying the high taxes that American companies and individuals pay to fund our bloated and nearly bankrupt government, especially for those of you doing business in Asia Pacific. Big companies with lots of money that donate to the political parties know how to avoid taxes, you should too. We help our clients from all over the world set up legal business structures where they are willing to pay reasonable amounts of tax and no capital gains on income or dividends. If big companies can do this, you can too. As always yeeha! Chinatex.
Comments
Feel free to leave a comment...
and oh, if you want a pic to show with your comment, go get a gravatar!
