Call Now (800) 681-1295

G-20 Crackdown on Foreign Tax Havens

Table of Contents



    Last month, the world’s largest nations took a potentially historic step by launching a system to detect secret offshore bank accounts.

    At an April 19 meeting in Washington, D.C., the G-20 group of nations announced an agreement to start an “automatic exchange” of information on bank accounts of people who may be evading taxes or trying to hide money abroad.

    At the same time, the G-20 agreed to put new pressure on tax havens to lift their bank secrecy laws. The G-20 cited 14 nations, including Switzerland, Panama, Guatemala and Trinidad and Tobago, as countries that don’t meet international standards of tax information exchange.

    The G-20 agreement has a good chance of succeeding because the United States and European governments, which make up the core of the G-20, are in desperate need of increasing their tax collections, and the agreement could be the beginning of the end of bank secrecy havens.

    A similar European agreement follows the steps of a 2012 U.S. law — the Foreign Accounts Tax Compliance Act — that requires foreign banks to report accounts of U.S. residents starting on Jan. 1, 2014.

    The G-20 countries will urge countries to automatically exchange tax information with their treaty partners “as appropriate” and “taking into account country-specific characteristics.” That leaves a lot of room for maneuvering.

    Still, the G-20 move starts a new process that will eventually make it harder for people to hide money offshore.


    Last Tuesday, on the home front, libertarian-leaning Senator Rand Paul introduced a bill to repeal parts of the Foreign Account Tax Compliance Act (FATCA). Although unlikely to have any success in Congress, Sen. Paul’s bill has been praised by anti-tax conservatives.

    FATCA, which is meant to go into effect next year, requires foreign financial institutions (i.e. banks, credit unions, investment firms, etc.) to submit financial informational to the Internal Revenue Service for all “U.S. persons” with overseas accounts worth more than $50,000, or face a fine and possible exclusion from the U.S. market.

    FATCA supporter Heather Lowe, director at the tax-policy watchdog Global Financial Integrity has claimed that FATCA is “crucial to cleaning up the worldwide shadow financial system. Foreign financial institutions should not harbor the illicit assets of U.S. tax evaders.” A recent study from the Tax Justice Network found that some of the world’s wealthiest individuals are hiding a staggering $21 trillion in offshore tax havens, with 100,000 individuals accounting for $9.4 trillion. These havens cost U.S. taxpayers an estimated $150 billion per year in lost tax revenue.


    A year ago, the IRS revived an open-ended program called the Offshore Voluntary Disclosure Program (OVDP), but the Service “may end the 2012 program at any time in the future,” according to the IRS website, so those with offshore accounts and corresponding tax liabilities should act now. While the current program has a higher penalty rate than similar programs in the past, it offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk detection by the IRS and possible criminal prosecution later.

    Disclosing foreign accounts enables U.S. taxpayers to become compliant, avoid substantial civil penalties, and essentially eliminate the risk of criminal prosecution. Those who fail to disclose such accounts run the risk of even higher penalties, including the fraud penalty and foreign information return penalties, not to mention criminal prosecution.


    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934