If you’re a regular visitor to our tax law blog, you may have seen our prior article discussing the Paradise Papers, a mass-scale leak of roughly 13.4 million financial documents exposing the offshore activities of over 520,000 businesses, foundations, trusts, and individuals from every corner of the globe. Following the initial leak on November 5, the International Consortium of Investigative Journalists (ICIJ), which is leading the media probe into the documents, publicly released a searchable database of the Paradise Papers. Anyone with an internet connection can browse these documents at their leisure, whether that means a casual reader, or an agent of the Internal Revenue Service (IRS). If you have unreported foreign assets and are concerned that you may be named in the Paradise Papers, which predominantly involve Bermuda and the Cayman Islands, you should discuss voluntary disclosure procedures with an international tax attorney immediately. While it is unclear if the Paradise Papers will yield criminal charges, the IRS’ history of aggressive offshore tax enforcement does not bode well for foreign account holders with undisclosed income.
After obtaining access to approximately 13.4 million documents comprising the Paradise Papers (not to be confused with the Panama Papers, which leaked under similar circumstances in 2016), German publication Süddeutsche Zeitung contacted the International Consortium of Investigative Journalists (ICIJ) to lead a journalistic mass probe featuring hundreds of journalists from nearly 70 nations.
Though the source of the leak, which was first acknowledged on November 5, remains anonymous as of early December, the bulk of the information comes from clients represented by Appleby, an offshore law firm with offices around the world – including one in Bermuda, where many of the offshore accounts revealed in the Paradise Papers are based. (Appleby has contradicted media descriptions of the firm as being headquartered in Bermuda, with one public statement reading, “We do not have a headquarters.”)
On November 17, ICIJ released the first wave of data to the public by creating a sprawling online database, which allows web users to search the Paradise Papers by country or jurisdiction. For example, if a user performs a country-based search for the term “Bermuda,” the database returns 1,305 offshore entities, 507 officers, 26 intermediaries, and 327 addresses, amongst several other pieces of information – each of which can be viewed individually in deeper detail. For example, if a site visitor selects “offshore entities,” he or she will see a list of all 1,305 entries, most of which are accompanied by information on date of incorporation, jurisdiction, the nation the entity is linked to, and the source of the data, which may be the Paradise Papers, the Panama Papers, or other leaks, namely “the Offshore Leaks” and “the Bahamas Leaks.”
Considering the IRS’ recent history of cracking down on offshore account holders and the institutions which aid them – a history which is littered with civil penalties, criminal investigations, convictions, and prison sentences – it is exceedingly difficult to believe that the Service will now deviate from its pattern and turn a blind eye. Though no one has been criminally charged as a result of the Paradise Papers, which were released only weeks ago, it seems overly optimistic to imagine that, in the months and years to come, no criminal prosecutions will be initiated.
With the Paradise Papers under intensifying scrutiny, at-risk individuals would be wise to consider taking swift preemptive action to mitigate potential penalties. For example, if you are not already subject to an IRS tax audit or IRS criminal investigation, you may be eligible to make a voluntary disclosure by participating in the Offshore Voluntary Disclosure Program, better known as the OVDP. If you participate in the 2014 OVDP, which is currently the most recent iteration of the program, you will pay tax with interest and penalties. However, in exchange for making the disclosure, you will also pay lower fines than you would have otherwise, while simultaneously neutralizing the threat of criminal prosecution.
If you are worried about being audited or investigated as a result of inclusion in the Paradise Papers, the best course of action for protecting your rights and minimizing the fallout is to contact a knowledgeable OVDP attorney who has extensive experience successfully helping taxpayers make voluntary disclosures of secret offshore accounts. At the Tax Law Office of David W. Klasing, our trusted team of CPAs, EAs, and tax attorneys bring over 20 years of combined experience to every matter we handle, and are prepared to aggressively represent you if you are accused of tax evasion or related offenses in connection with undisclosed offshore accounts. To book a reduced-rate consultation concerning the OVDP, FBAR requirements, FATCA requirements, or other aspects of international tax compliance, contact our criminal tax defense lawyers online today, or call the Tax Law Office of David W. Klasing at (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.