TAX FRAUD: REDOUBLED INTERNATIONAL EFFORTS AT FIGHTING IT WITH CONSEQUENCES FOR AMERICANS
A number of European countries are organizing to combat tax fraud committed by those taking advantage of various loopholes. In part, these loopholes arise because the various European countries have differing tax laws. “Taxpayers can easily shift their interest income across borders, searching for the most favorable tax jurisdictions in the EU,” describes the Wall Street Journal.
It was estimated that members of the European Union lose approximately $1.3 trillion per year—and, during an economic recession it makes sense that they seek to capture their foregone revenue.
Accordingly, many of these countries are deciding to syndicate for better tax compliance. The plan, called the Platform for Tax Good Governance, contains at least two initiatives. First, a committee will be formed to monitor the progress of European Union states in their enforcement and efforts to fight tax evasion. This committee will start meeting next month.
The second initiative involves smoothing out the differences between the jurisdictions, closing the tax loopholes. To this end, the Platform for Tax Good Governance will consider the tax treaties with neighboring countries and revise their “anti-abuse” statutes. See “Tackling Tax Evasion.”
In addition to the new initiative by the European Commission, the British Prime Minister, David Cameron, urged European Union leaders to combat tax fraud. One measure considered was using mechanized exchange of data from overseas bank accounts. Ultimately, however, what the Minister prefers is a global reform of the tax laws. The Wall Street Journal describes it thus: “Europe is stepping up its efforts to fight tax evasion and money laundering with the announcement of an experimental information-sharing regime involving the region’s largest economies.”
The top EU leaders will meet this May 22, and on their top agenda includes cracking down on tax fraud.
What does all this mean for United States Citizens? For one thing, it means that if the banks of European counties share information on an intra-bank network, it will be harder for U.S. citizens to retain undisclosed accounts abroad in such countries as Switzerland, Monaco, among others.
Further, the creation of an intra-bank network that automatically scans for tax non-compliance (or tax havens, accounting fraud, or the like) could be extended more readily to other countries—like the Cayman Islands, or other popular offshore account locations.
More than this, however, if the recent initiatives mean anything, it means there is greater incentive for U.S. citizens to voluntarily disclose their offshore accounts. During tough economic times, the IRS realizes people will be more tempted to cheat on their income taxes. And this is especially so with the passage of the new tax laws, increasing the tax rates on Americans, including the new 3.8% surtax for Obamacare.