Wednesday, January 17, 2018
The Internal Revenue Service strongly encouraged taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.
This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.
Taxpayers affected by this law are those with a seriously delinquent tax debt. A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.
There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:
- Paying the tax debt in full
- Paying the tax debt timely under an approved installment agreement,
- Paying the tax debt timely under an accepted offer in compromise,
- Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
- Having requested or have a pending collection due process appeal with a levy, or
- Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.
A passport won’t be at risk under this program for any taxpayer:
- Who is in bankruptcy
- Who is identified by the IRS as a victim of tax-related identity theft
- Whose account the IRS has determined is currently not collectible due to hardship
- Who is located within a federally declared disaster area
- Who has a request pending with the IRS for an installment agreement
- Who has a pending offer in compromise with the IRS
- Who has an IRS accepted adjustment that will satisfy the debt in full
For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.
In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs, including the following:
- Taxpayers can request a payment agreement with the IRS by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers can use the online payment agreement to set up a monthly payment agreement for up to 72 months.
- Some financially distressed taxpayers may qualify for an offer in compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.
Sunday, December 31, 2017
Since the inception of the SBP, 80 Swiss banks have entered into Non-Prosecution Agreements (NPAs) paying over 1.3 Billion in penalties, with about 58 investigative leads being sent to various CI field offices for investigation and action. Additionally, over 18,000 leads that did not meet criminal criteria have been forwarded to IRS’ LB&I Division for civil tax compliance action. (see Page 18)
As the SBP winds down and is scheduled to end in 2017, an International Tax group is being ramped up in CI’s Washington D.C field office. This group’s focus will be to dismantle the most significant International Tax schemes that have been identified as systemic threats to the integrity and fairness of the tax administration. Investigations initiated by this group will be long-term in nature and utilize all tools at the Criminal Investigation Division’s disposal.
Tuesday, December 19, 2017
The Hon. Kevin Peter Turnquest, Deputy Prime Minister and Minister of Finance of the Bahamas signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (“the Convention”) in the presence of OECD Secretary General Angel Gurria. With this signing, The Bahamas becomes the 116th jurisdiction to join the world’s leading instrument for boosting transparency and combating cross-border tax evasion.
The Convention is the most powerful instrument for international tax cooperation providing for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.
The Convention will enable The Bahamas to fulfil their commitment to implement the Standard for Automatic Exchange of Financial Account Information in Tax Mattersand begin the first of such exchanges by 2018. The Bahamas also during the week signed the Multilateral Competent Authority Agreement (MCAA), in the margins of the 14th meeting of the Automatic Exchange of Information Group of the Global Forum on Transparency and Exchange of Information in Tax Matters which took place on 13-15 December 2017 in San Marino. The MCAA, which is a framework agreement specifies the details of what information will be exchanged and when and has been signed by 97 jurisdictions.
In another major step to boost international tax cooperation, The Bahamas has also joined the inclusive framework on BEPS today which makes it the 110th jurisdiction participating on an equal footing in the BEPS Project as Associates. The Convention can also be used to swiftly implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project.
“Signing “the Convention” is an assertion of the commitment by The Bahamas to protect the integrity of its financial services industry and to effectively implement the OECD's international standards on tax transparency for the automatic exchange of financial account information,” said The Hon. Kevin Peter Turnquest, Deputy Prime Minister and Minister of Finance of the Bahamas. “The Bahamas is a well known leading international financial centre, as such, we will continue to maintain a well regulated and transparent environment for the provision of international financial services. This week, we have taken major steps to ensure this by also signing the Multilateral Competent Authority Agreement (MCAA), and by joining the inclusive framework on Base Erosion Profit Shifting (BEPS)".
- The 116 jurisdictions participating in the Convention can be found at: www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf
- The list of jurisdictions that have signed Multilateral Competent Authority Agreement is available here: http://www.oecd.org/tax/exchange-of-tax-information/MCAA-Signatories.pdf
- Download the full list of all countries and jurisdictions participating in the inclusive framework on BEPS.
Sunday, December 17, 2017
The IRS published new QI/WP/WT FAQs. The FAQs can be found in the New Applications/Renewals (Q17, Q18 and Q19) and Certifications and Periodic Reviews (Q1 and Q2) subsections on the FATCA – FAQs General page.
Now in its 7th edition, this industry-leading 2,300-page analysis of the FATCA and CRS compliance challenges, 92 chapters by FATCA and CRS contributing experts analyzing 35 FATCA and CRS topics and 57 countries’ regulations. Besides in-depth, practical analysis, the 2018 edition includes examples, charts, timelines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers. Byrnes’ Guide to FATCA & CRS Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments. This treatise also includes in-depth analysis of designing a FATCA and CRS internal policy, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, validation for fit for purpose, data management, and exchange by firms and between countries, insights as to the application of FATCA, CRS, and the IGAs within BRIC, SEA and European country chapters. This seventh edition provides the financial enterprise’s FATCA and CRS compliance officer the tools for developing and maintaining a best practices compliance strategy. This book does not contain fluff such as page filling forms and regs (that are linked to instead)– it’s all analysis and compliance support materials!
Friday, December 1, 2017
On Friday, December 1, 2017, the Senate will vote on whether to repeal chapter 4 of the Internal Revenue Code (IRC), also known as FATCA, or whether to continue to it. The vote will be broadcast live on C Span here. All amendments are listed here with the respective vote.
Senator Rand Paul and Senator Wicker have submitted Senate Amendment 1623 to repeal FATCA as part of the Senate Tax Bill to be voted on as a package late Friday night.
The supporting documents for analysis and scoring cite to the academic research of Professor William Byrnes of Texas A&M University School of Law as published in several articles on SSRN.
Summary of analysis IRS data by William Byrnes of Texas A&M University School of Law http://law.tamu.edu/faculty-staff/find-people/faculty-profiles/william-byrnes; firstname.lastname@example.org; O: (817) 212-3969; M: (786) 271-5202.
Through October 2016, 55,800 taxpayers have come into the OVDP (Overseas Voluntary Departure Program) to resolve their tax obligations, paying more than $9.9B in combined taxes, interest and primarily FBAR (Report of Foreign Bank and Financial Accounts) penalties since 2009. In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450M in combined taxes, interest and penalties. (See: “Offshore Voluntary Compliance Efforts Top $10 Billion; More Than 100,000 Taxpayers Come Back into Compliance”; IR-2016-137, Oct. 21, 2016; https://www.irs.gov/newsroom/offshore-voluntary-compliance-efforts-top-10-billion-more-than-100000-taxpayers-come-back-into-compliance ) However, this is the yield for all payments (interest and penalties, not just taxes) and from all overseas recovery programs (not just FATCA). To isolate tax revenues recovered solely due to FATCA, Byrnes notes that streamlined procedures are only producing a revenue from three years of tax filings, interest and penalties of $9,375 per taxpayer. This indicates that the portion of the combined tax payments attributable solely to FATCA from income that would not otherwise have been reported from taxpayers who would not have been in compliance absent FATCA is a fraction of the OVDP, less than $300M and probably more realistically in the range of $100-200M and falling over time.
In its budget request for 2017, the IRS requested a half-billion dollar budget increase, of which more than 20 percent is for an increase of $126,739,000 to fund 273 FTE (full time employee) positions solely for FATCA activities under the heading “Theme 2: Understand non-compliant taxpayer behavior and develop approaches to deter and change it.” https://www.irs.gov/pub/newsroom/IRS%20FY%202017%20BIB.pdf The increase (the equivalent of $460,000 per FTE requested) is targeted to “updates to the legacy electronic filing system to modify and process FATCA forms, add additional capabilities in the webbased registration system, and enhance functionality in the systems that facilitate the exchange and processing of FATCA data to and from withholding agents, Foreign Financial Institutions (FFIs) and Host Country Tax Authorities and the United States.” Translated into normal English, this means contending with a flood of data in foreign formats, the overwhelming bulk of which has no tax enforcement value. The $127M increase is above existing spending on personnel and systems, which is not broken out specifically for FATCA. Given the size of the 2017 increase, a base of least $75M for FATCA activities is a conservative estimate of legacy annual FATCA spending, with the new projected total in the range of $200M, perhaps as high as $250M. This is only IRS costs and does not include damage to U.S. geopolitical interests through the forcing of FATCA and “intergovernmental agreements” upon foreign governments, with the industry costs associated therefrom more than $100 billion.
SA 1623. Mr. PAUL (for himself and Mr. Wicker) submitted an amendment intended to be proposed to amendment SA 1618 proposed by Mr. Hatch (for himself and Ms. Murkowski) and intended to be proposed to the bill H.R. 1, to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018; which was ordered to lie on the table; as follows:
At the end of subtitle D of title I, add the following: PART IV--REPEAL OF FOREIGN ACCOUNT TAX COMPLIANCE ACT SEC. 14601. REPEAL OF WITHHOLDING AND REPORTING WITH RESPECT TO CERTAIN FOREIGN ACCOUNTS.
(a) In General.--Chapter 4 is repealed.
(b) Conforming Amendments for Rules for Electronically Filed Returns.--Section 6011(e)(4) is amended-- (1) by inserting ``, as in effect on January 1, 2017'' after ``(as defined in section 1471(d)(5)'', and (2) by striking ``or 1474(a)''. (c) Conforming Amendment Related to Substitute Dividends.-- Section 871(m) is amended by striking ``chapters 3 and 4'' both places it appears and inserting ``chapter 3''. (d) Other Conforming Amendments.-- (1) Section 6414 s amended by striking ``or 4''. (2) Paragraph (1) of section 6501(b) is amended by striking ``4,''. (3) Paragraph (2) of section 6501(b) is amended-- (A) by striking ``4,'', and (B) by striking ``and witholding taxes'' in the heading and inserting ``taxes and tax imposed by chapter 3''. (4) Paragraph (3) of section 6513(b) is amended-- (A) by striking ``or 4'', and (B) by striking ``or 1474(b)''. (5) Section 6513(c) is amended by striking ``4,''. (6) Section 6611(e)(4) is amended by striking ``or 4''. (7) Paragraph (1) of section 6724(d) is amended by striking ``under chapter 4 or''. (8) Paragraph (2) of section 6724(d) is amended by striking ``or 4''. (e) Effective Date.--The amendments made by this section shall apply to payments made after the date of the enactment of this Act.
SEC. 14602. REPEAL OF INFORMATION REPORTING WITH RESPECT TO FOREIGN FINANCIAL ASSETS. (a) In General.--Subpart A of part III of subchapter A of chapter 61 is amended by striking section 6038D. (b) Repeal of Modification of Statute of Limitations for Significant Omission of Income in Connection With Foreign Assets.-- (1) Paragraph (1) of section 6501(e) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively. (2) Subparagraph (A) of section 6501(e), as redesignated by paragraph (1), is amended by striking all that precedes clause (i) and inserting the following: ``(A) General rule.--If the taxpayer omits from gross income an amount properly included therein which is in excess of 25 percent of the amount of gross income stated in the return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed. For purposes of this subparagraph--''. [[Page S7469]] (3) Paragraph (2) of section 6229(c) is amended by striking ``and such amount is described in clause (i) or (ii) of section 6501(e)(1)(A)'' and inserting ``which is in excess of 25 percent of the amount of gross income stated in its return''. (4) Paragraph (8) of section 6501(c) is amended-- (A) by striking ``pursuant to an election under section 1295(b) or'', (B) by striking ``1298(f)'', and (C) by striking ``6038D,''. (c) Clerical Amendment.--The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by striking the item related to section 6038D. (d) Effective Date.-- (1) In general.--Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. (2) Returns.--The amendments made by subsection (b) shall apply to returns filed after the date of the enactment of this Act.
SEC. 14603. REPEAL OF PENALTIES FOR UNDERPAYMENTS ATTRIBUTABLE TO UNDISCLOSED FOREIGN FINANCIAL ASSETS. (a) In General.--Section 6662 is amended-- (1) in subsection (b), by striking paragraph (7) and redesignating paragraph (8) as paragraph (7), and (2) by striking subsection (j) and redesignating subsection (k) as subsection (j). (b) Effective Date.--The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.
SEC. 14604. REPEAL OF REPORTING OF ACTIVITIES WITH RESPECT TO PASSIVE FOREIGN INVESTMENT COMPANIES. (a) In General.--Section 1298 is amended by striking subsection (f) and by redesignating subsection (g) as subsection (f). (b) Conforming Amendment.--Section 1291(e) is amended by striking ``and (d)'' and inserting ``, (d), and (f)''. (c) Effective Date.--The amendments made by this section shall take effect on the date of the enactment of this Act.
SEC. 14605. REPEAL OF REPORTING REQUIREMENT FOR UNITED STATES OWNERS OF FOREIGN TRUSTS. (a) In General.--Paragraph (1) of section 6048(b) is amended by striking ``shall submit such information as the Secretary may prescribe with respect to such trust for such year and''. (b) Effective Date.--The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.
SEC. 14606. REPEAL OF MINIMUM PENALTY WITH RESPECT TO FAILURE TO REPORT ON CERTAIN FOREIGN TRUSTS. (a) In General.--Section 6677(a) is amended-- (1) by striking ``the greater of $10,000 or'', and (2) by striking the last sentence and inserting the following: ``In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.''. (b) Effective Date.--The amendments made by this section shall apply to notices and returns required to be filed after the date of the enactment of this Act.
Monday, November 20, 2017
In the aftermath of the release of the “Paradise Papers”, 200 delegates from more than 90 delegations met in Yaoundé, Cameroon for the 10th meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes which now includes 147 countries and jurisdictions.
The Global Forum adopted the first report on the status of implementation of the AEOI Standarda few weeks after almost 50 countries started exchanges of information under the new standard on automatic exchange of information, with another 53 countries starting in September 2018. The principle of annual implementation reports and peer reviews were agreed at the meeting to ensure effective implementation and a level playing field.
The Global Forum published peer reviews of Curaçao, Denmark, India, Isle of Man, Italy and Jersey. The publications bring to a total of 16 the number of second round reviews of the Forum’s 147 member countries and jurisdictions based on its international standard of transparency and exchange of financial account information on request. The standard was reinforced last year to tackle tax evasion more effectively, particularly in areas covering the concept of beneficial ownership.
- Read the full news release
- Download the AEOI implementation report
- Access the peer reviews
- Find our more on the Global Forum
Sunday, November 19, 2017
His Excellency Khalid Bin Rashid Al-Mansouri, Ambassador of the State of Qatar to France, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of the OECD Deputy Secretary-General Masamichi Kono. Qatar is the 115th jurisdiction to join the Convention.
The Convention provides all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.
The Convention's impact grows with each new signatory; it also serves as the premier instrument for implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries, and which is being implemented by over 100 jurisdictions. In this respect, Qatar has today also signed the CRS Multilateral Competent Authority Agreement (CRS MCAA), re-confirming its commitment to implementing the automatic exchange of financial account information pursuant to the OECD/G20 Common Reporting Standard (CRS) in time to commence exchanges in 2018. Qatar is the 96th jurisdiction to sign the CRS MCAA.
The Convention can also be used to swiftly implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project. The Convention is also a powerful tool in the fight against illicit financial flows.
The Convention was developed jointly by the OECD and the Council of Europe in 1988 and amended in 2010 to respond to the call by the G20 to align it to the international standard on exchange of information and to open it to all countries, thus ensuring that countries around the world could benefit from the new more transparent environment.
The 115 jurisdictions participating in the Convention can be found at: www.oecd.org/tax/exchange-of-tax-information/Status_of_convention.pdf
Friday, November 17, 2017
The CEO of one of the world’s largest independent financial services organizations has co-written an assertive open letter to the U.S. Treasury Secretary to demand the Trump administration scrap the Foreign Account Tax Compliance Act.
Nigel Green, together with Jim Jatras, his co-leader of the Campaign to Repeal FATCA, have sent the five-page letter to the Honorable Steve Mnuchin as, after a year in office, nothing has been done to abandon the “worst law most Americans have never heard of.” This despite promises in the election campaign that, should they win, the Republicans would “call for repeal” of FATCA.
Enacted in 2010 by a Democrat-controlled Congress and signed into law by Barack Obama, FATCA is virtually unknown to most Americans but has been wreaking havoc with the global financial system outside the U.S. Touted as a weapon against “fat cat” tax evaders stashing funds offshore, FATCA is instead an indiscriminate information dragnet requiring all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) in every country in the world to report data on all specified U.S. accounts to the IRS. If any country refuses to comply, FATCA provides for its financial sector to be hit with crippling penalties that will tank its economy.
The letter, dated November 14, states: “We are writing to you on the supposition that in a democratic country, elections should have consequences. When a political party stands before the electorate on declared principles and makes specific promises, those principles and promises should be reflected in how that party governs under its mandate from the voters.”
They are referring to the 2016 Republican Platform that read: “The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements result in government’s warrantless seizure of personal financial information without reasonable suspicion or probable cause. Americans overseas should enjoy the same rights as Americans residing in the United States, whose private financial information is not subject to disclosure to the government except as to interest earned. The requirement for all banks around the world to provide detailed information to the IRS about American account holders outside the United States has resulted in banks refusing service to them. Thus, FATCA not only allows ‘unreasonable search and seizures’ but also threatens the ability of overseas Americans to lead normal lives. We call for its repeal and for a change to residency-based taxation for U.S. citizens overseas.”
In the letter, Mr Green and Mr Jatras comment: “This Republican pledge to repeal FATCA rests on the deepest and most cherished American principles, not least a decent respect for the privacy of citizens who are not engaged in lawbreaking and are not even suspected of doing so. Even the IRS’s own Taxpayer Advocate Service has criticized FATCA’s ‘enforcement-oriented regime with respect to international taxpayers’ with its ‘operative assumption [that] appears to be that all such taxpayers should be suspected of fraudulent activity, unless proven otherwise’.”
They add: “We are confident that legislative progress is being made and that FATCA will be repealed in the near future. We are writing to you now because of our disappointment that no positive action has yet been taken by the other part of the apparatus of government, in the Executive Branch. This includes the Department of the Treasury.”
Nigel Green and Jim Jatras launched the Campaign to Repeal FATCA, a Washington DC-based lobbying group, in February.
At the launch, Mr Green noted: “FATCA is an extraterritorial diktat that burdens other countries’ financial institutions and their clients, which violates other countries’ sovereignty, and which is detrimental to their consumers and taxpayers.
“It turns law-abiding, middle-class Americans living overseas, of whom there are approximately eight million, into financial pariahs.”
The letter to Secretary Mnuchin, in which it is requested that he personally takes “firm action”, concludes with a sharp assertion: “It’s well past time that the choice American voters made last year became a reality with respect to this critical issue.”
In summary, Jim Jatras affirms: “To put it bluntly, after the passage of a full year since Election Day 2016, by all indications the Obama Administration remains firmly in power as far as FATCA is concerned.”
The full text of the letter follows below and is available in PDF here:
Campaign to Repeal FATCA
November 14, 2017
The Honorable Steven Terner Mnuchin
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Mnuchin:
The Campaign to Repeal FATCA (www.RepealFATCAcom) was launched earlier this year with one purpose: to get rid of the Foreign Account Tax Compliance Act. FATCA is a textbook example of a badly conceived, badly written, and badly enforced law that doesn’t achieve its stated purpose but does inflict an excess of harmful consequences on citizens, American taxpayers around the world, the global financial and investment sectors, and the principle of national sovereignty.
As Co-Leaders of the Campaign, we are writing to you on the supposition that in a democratic country elections should have consequences. When a political party stands before the electorate on declared principles and makes specific promises, those principles and promises should be reflected in how that party governs under its mandate from the voters.
The 2016 Republican Platform reads in part:
“The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements result in government’s warrantless seizure of personal financial information without reasonable suspicion or probable cause. Americans overseas should enjoy the same rights as Americans residing in the United States, whose private financial information is not subject to disclosure to the government except as to interest earned. The requirement for all banks around the world to provide detailed information to the IRS about American account holders outside the United States has resulted in banks refusing service to them. Thus, FATCA not only allows ‘unreasonable search and seizures’ but also threatens the ability of overseas Americans to lead normal lives. We call for its repeal and for a change to residency-based taxation for U.S. citizens overseas.”
This Republican pledge to repeal FATCA rests on the deepest and most cherished American principles, not least a decent respect for the privacy of citizens who are not engaged in lawbreaking and are not even suspected of doing so. Even the IRS’s own Taxpayer Advocate Service has criticized FATCA’s “enforcement-oriented regime with respect to international taxpayers” with its “operative assumption [that] appears to be that all such taxpayers should be suspected of fraudulent activity, unless proven otherwise.”
FATCA’s privacy violations and compliance burdens fall disproportionately upon people of moderate means, few of whom are engaged in evasion or owe any tax at all. As examined at a hearing on April 26 of this year by the House Subcommittee on Government Oversight presided over by House Freedom Caucus Chairman Mark Meadows, FATCA has led to financial institutions around the world denying or withdrawing financial services from Americans, in turn leading to growing numbers of U.S citizenship renunciations. (Meanwhile the genuine “fat cats” supposedly targeted by FATCA can easily avoid it by hiding assets in real estate, bullion, fine art, gems, and other ruses.)
FATCA’s indiscriminate invasion of privacy would be unjustifiable even if it were an effective mechanism for detecting offshore tax evasion and recovering revenues due. But FATCA is a failure from that standpoint as well, as irrefutably demonstrated by Professor William Byrnes of Texas A&M University School of Law, who calculates that the actual net recovery attributable to FATCA is a mere $100-200 million per year – far less than the approximately $800 million it was scored upon enactment in 2010. Worse, projects Byrnes, the recovery trend is downward, and FATCA (excepting penalties for filing deficiencies, even where there is no tax liability) could soon cost more money than it brings in. This contrasts to the IRS’s standard of approximately seven dollars in tax recovery for every enforcement dollar spent. As a weapon to combat tax evasion, FATCA is a waste of money that could be more effectively spent on other programs.
In addition, FATCA imposes massive compliance costs on the entire global financial system – money that comes out of the pockets of customers, depositors, and shareholders. Even a small non-U.S. bank can expect to spend millions of dollars looking for American “indicia” among thousands of accounts. According to available data, bigger institutions spend much more. For example, according to the Wall Street Journal, Canada’s “Big Five” banks collectively had paid out $693.5 million in primary compliance by 2014. Bank of Nova Scotia alone had spent $100 million as of 2013. As cited by Professor Byrnes, BBVA (Banco Bilbao Vizcaya Argentaria, S.A.), Spain’s second-largest bank, estimates FATCA compliance costs to be at least €8 million for a local entity up to €800 million for a global one; similarly a cost estimate from the U.K. Revenue for British financial institutions is a one-off cost of approximately £900 million to £1,600 million, with an ongoing cost of £50 million to £90 million a year. Estimates of total global compliance spending rely on aggregating what is known about per-institution costs. One such projection assesses FATCA’s cumulative cost at between $58 billion and $170 billion. This is an order of magnitude greater than any recoveries from FATCA.
It is thus no mystery why big accounting, law, and software firms are thrilled with FATCA and are keen to insist that “FATCA is here to stay!” But corporate welfare for compliance vendors who are the real fat cats in this saga is no reason to keep a bad law.
Thus, there is overwhelming reason for the Republican Party – which is in unified control of the Executive Branch and of both houses of Congress – to keep its promise to the American people. To that end, our Campaign is working with the Congressional sponsors of FATCA repeal legislation in both chambers: Senator Rand Paul (S.869) and Representative Mark Meadows (H.R. 2054). The repeal movement has also gained the support of numerous taxpayer groups, including Americans for Tax Reform, the National Taxpayers Union, the Center for Freedom and Prosperity, American Commitment, the Taxpayers Protection Alliance, the Competitive Enterprise Institute, R Street Institute, The Market Institute, the Center for Individual Freedom, Frontiers of Freedom, 60 Plus Association, FreedomWorks, the Sovereign Society Freedom Alliance, the Institute for Liberty, The National Tax Limitation Committee, Citizen Outreach, Campaign for Liberty, Jeffersonian Project, The Institute for Policy Innovation, Americans for Limited Government, the National Center for Policy Analysis, the Small Business and Entrepreneurship Council, and others. In addition, the Credit Unions of North America and the World Council of Credit Unions have also called for repealing FATCA.
We are confident that legislative progress is being made and that FATCA will be repealed in the near future. We are writing to you now because of our disappointment that no positive action has yet been taken by the other part of the apparatus of government, in the Executive Branch. This includes the Department of the Treasury.
Our concerns in this area relate mainly to the so-called “intergovernmental agreements” (IGAs). The IGAs are a product of the Treasury Department’s realization soon after FATCA’s enactment that it was unenforceable in light of other countries’ privacy laws and that the only way to implement this ill-advised and badly crafted mandate on hundreds of thousands of non-U.S. firms – over which American law has no jurisdiction – would be to induce foreign governments to enforce FATCA against their own citizens and institutions. Worse, as an incentive for foreign governments to sign the IGAs, the Geithner and Lew Treasury Department promised, in the name of the United States, to provide “reciprocal” information from U.S. institutions – a promise which, if kept, would impose immense FATCA-like compliance costs on American domestic financial firms.
Neither such reporting nor the IGAs themselves are authorized by FATCA or any other statute. The IGAs are not submitted as treaties to the U.S. Senate for that body’s advice and consent, though the non-U.S. party is required to ratify the IGA under “its necessary internal procedures for entry into force.” Imposing such one-sided agreements on America’s trading partners under threat of sanctions amounts to a gross violation of international comity and the very concept of national sovereignty. No wonder the Organisation for Economic Co-operation and Development, which for years has sought to extinguish personal financial privacy and create a worldwide financial data fishbowl, has praised the IGAs as a “catalyst” to that end.
It should be clear from the foregoing that the IGAs are a textbook example of the prior administration’s disdain for the rule of law in favor of Executive overreach. As former House Speaker John Boehner put it in another context, President Barack Obama demonstrated an unprecedented circumvention of Congressional authority “through executive action, changing and creating his own laws, and excusing himself from enforcing statutes he is sworn to uphold – at times even boasting about his willingness to do it, as if daring the American people to stop him.” This characterization fits the IGAs to a T.
Secretary Mnuchin, the IGAs are purely inventions of the Treasury Department under your two immediate predecessors and can be revoked by you under the same authority. We are aware of at least two Congressional letters sent to you taking issue with the IGAs and urging specific steps by your Department to nullify the IGAs and alleviate their harmful impact. One letter, from Senator Paul and Congressman Meadows, was sent on April 3, 2017, and was also addressed to OMB Director Mick Mulvaney. The other, from Congressman Bill Posey, a member of the Financial Services Committee, was sent on September 29.
Despite these urgings, nothing has been done to reverse your predecessors’ highhanded and legally dubious actions related to FATCA. Quite to the contrary, under the Trump Administration the Department has pressed ahead with signing additional IGAs. For example, an IGA was signed with Ukraine in February of this year – after President Trump took office – and with Kazakhstan in September. Making “progress” towards a FATCA agreement with Singapore (a euphemism for pressuring that country) was part of President Trump’s briefing points for Prime Minister Lee Hsien Loong’s White House visit in October.
To put it bluntly, after the passage of a full year since Election Day 2016, by all indications the Obama Administration remains firmly in power as far as FATCA and the IGAs are concerned. While from outside the Treasury Department we are not in a position to tell which individuals are responsible for this state of affairs, we suggest with all due respect that it is your responsibility to inform the career officials who work for you than an election took place last year and to direct them to cease their efforts to carry out your predecessors’ legally deficient directives with respect to FATCA. At a minimum this should include (from the April 3 letter to you from Senator Paul and Representative Meadows) your taking action to –
“Instruct the Treasury Department’s Office of International Affairs and other elements of the Department that may be involved to cease all efforts to negotiate, sign, and implement IGAs. Continued signings of new IGAs – most recently with Ukraine in February 2017 – send a false signal that the new administration is committed to this destructive law as matter of policy.
“Announce that the IGAs are under legal review of their authority and that if they are found to be legally infirm – as I [sic] believe they will be – they may be declared invalid ab initiowith immediate effect or terminated upon expiry of the one-year’s notice specified.
“Under the broad authority FATCA grants the Treasury Secretary, deem all impacted foreign institutions compliant on a temporary basis pending outcome of the legal review of the IGAs. The IRS should also be instructed to suspend enforcement of provisions impacting individual taxpayers; and, on an urgent basis to help decrease the spiking increasing [sic] in U.S. citizenship renunciations, suspend imposition of penalties for FATCA filing errors by individuals.”
We thank you for your prompt attention to this matter and your anticipated implementation of the measures above.
We now turn our attention to a distinct but related topic. The same passage in the Republican Platform pertaining to FATCA also calls for “a change to residency-based taxation for U.S. citizens overseas.” As is not necessary to detail here, the United States is the only major country that taxes its citizens worldwide on the basis of citizenship, not residence. This creates a host of problems and inequities for the up to ten million Americans resident abroad. While adoption of a residency-based taxation (RBT) system is not a specific task of our Campaign, we strongly endorse the concept and hope it will be enacted as part of tax reform legislation pending on Capitol Hill.
As far as we are aware, RBT is not yet included in either the House or Senate tax bill. We also note that there are several approaches as to how RBT could be adopted. However, we draw your attention to the fact that suggestions have been made that adoption of RBT – were it to occur – would eliminate the need for repealing FATCA.
In our opinion, nothing could be further from the truth. While adoption of RBT could in some minor way assuage the administrative pain inflicted on Americans abroad, the fundamental flaws of FATCA would remain. As far as FATCA goes, RBT’s positive impact would be comparable to an aspirin’s on cancer. (This is not meant to minimize RBT’s benefits on matters unrelated to FATCA.)
Even under an RBT system, the larger toxic features of FATCA would remain. Keep in mind that FATCA is purely a financial reporting mandate that has no direct relationship to taxes or to what assets get taxed. FATCA demands data on assets whether they are subject to taxation or not. In principle, FATCA and the IGAs could stay in place just as they are even if RBT is adopted. At best, the entire structure of FATCA’s indiscriminate violation of personal privacy would remain unaffected except, in principle, applied only to U.S. residents as opposed to all citizens. The IGAs would presumably stay in place as well, with their ongoing damage to the principle of state sovereignty. The massive compliance costs imposed on financial institutions globally would remain, as would the gravy train for the relevant vendors.
Perhaps worst of all, by enacting RBT but leaving FATCA on the books, the Trump Administration would be wrongly declaring the FATCA problem solved. This would allow the dead hand of the past administration to reach into the future without limit: more IGAs, perhaps in due course the imposition of reciprocity on domestic American financial firms, and in the foreseeable future a global FATCA – or “GATCA.” This is the antithesis of what the GOP Platform promised.
The media carry numerous accounts of how the Trump Administration’s policies are being undermined by career bureaucrats and, in some cases, even holdovers from the Obama era. To the extent that that is the case at the Treasury Department and the root of the concerns we have expressed in this letter, we ask that you take prompt and firm action to rectify matters. We are already almost a year into what was supposed to be a sharp break from the failed policies of the past with as yet no Executive progress on FATCA. It’s well past time that the choice American voters made last year became a reality with respect to this critical issue.
Thanking you in advance for your attention and consideration, we remain –
Nigel J. Green
The Honorable Rand Paul
The Honorable Mark Meadows
The Honorable Bill Posey
The Honorable Mick Mulvaney
Mr. Grover Norquist, Americans for Tax Reform
Mr. Pete Sepp, National Taxpayers Union
Mr. Brian Garst, Center for Freedom and Prosperity
Thursday, November 2, 2017
Green Card Holder Pleads Guilty of Failing to File FBAR and Report UBS Account, Will Pay More than Half the Assets in FBAR and Tax Penalties
According to court documents and information provided in court, Hyung Kwon Kim, a citizen of South Korea and, since 1998, a legal permanent resident of the United States, resided in Massachusetts and later in Connecticut. Around 1998, Kim traveled to Switzerland to identify financial institutions at which to open accounts for the purpose of receiving transfers of funds from another individual in Hong Kong. Over the next few years, Kim opened accounts at several banks, including Credit Suisse, UBS, Bank Leu, Clariden Leu, and Bank Hofmann. In 2004, the value of the funds in Kim’s accounts exceeded $28 million.
U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR, disclosing the account.
Kim conspired with several bankers, including Dr. Edgar H. Paltzer, to conceal the funds from U.S. authorities. Paltzer, who was convicted in 2013 in the Southern District of New York for conspiring to defraud the United States, and the other bankers assisted Kim in opening accounts in the names of sham entities organized in Liechtenstein, Panama and the British Virgin Islands. Paltzer and the other bankers facilitated financial transactions for Kim, so that Kim could use the funds in the United States. For example, between 2003 and 2004, Kim directed Paltzer and another banker to issue nearly $3 million in checks payable to third parties in the United States for the purchase of a residence in Greenwich, Connecticut. In 2005, Kim created a nominee entity to hold title for the purchase of another home on Stage Harbor in Chatham, Massachusetts, for nearly $5 million. Kim and Paltzer communicated about the purchase in a manner that created the appearance that Kim was renting the property from a fictitious owner.
Between 2000 and 2008, Kim took multiple trips to Zurich, Switzerland and withdrew more than $600,000 in cash during these visits. He also brought his offshore assets back to the United States by purchasing millions of dollars’ worth of jewelry and loose gems. For example, in 2008, Kim purchased an 8.6 carat ruby ring from a jeweler in Greenwich, Connecticut, which he financed by causing Bank Leu to issue three checks totaling $2.2 million to the jeweler.
In 2008, during a trip to Zurich, Kim’s banker at Clariden Leu informed Kim that due to ongoing investigations in the United States, Kim could either disclose the accounts to the U.S. government, spend the funds, or move the funds to another institution. Kim moved the funds into nominee accounts at another bank. In 2011, Kim liquidated the accounts by, among other things, withdrawing tens of thousands of dollars in cash and purchasing three loose diamonds for about $1.7 million from the Greenwich jeweler.
Kim also admitted that from 2000 through 2011, he filed false income tax returns for 1999 through 2010, on which he failed to report income from the assets held in the foreign financial accounts that he owned and controlled in Switzerland.
As part of his plea agreement, Kim will pay a civil penalty of over $14 million dollars to the United States Treasury for failing to file, and filing false, FBARs, which is separate from any restitution the Court may order.
“For more than a decade Hyung Kim concealed his wealth in secret offshore accounts, evading reporting requirements and the payment of income taxes due,” said Acting Deputy Assistant Attorney General Goldberg. “With his guilty plea, he is now held to account for his criminal conduct. Offshore tax evasion is a top priority for the Tax Division, and we will continue to work with our partners at IRS to follow the money and actively pursue those who persist in thinking that they can safely hide their income and assets offshore.”
“Mr. Kim’s plea is another example of what happens to those who dodge their tax obligations by utilizing offshore tax havens,” said Chief Don Fort, IRS Criminal Investigation. “We owe it to the vast majority of honest U.S. taxpayers to tirelessly search for and prosecute those who avoid paying their fair share, regardless of how they may try to disguise their income.”
Sentencing is scheduled for Jan. 26, 2018 before U.S. District Court Judge T.S. Ellis III. Kim faces a statutory maximum sentence of five years in prison. He also faces a period of supervised release, restitution, and monetary penalties, in addition to the FBAR penalty.
Monday, October 30, 2017
Peru becomes 114th Country to Sign OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters
Claudia María Amelia Teresa Cooper Fort, Minister of Economy and Finance of Peru, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of the Deputy Director of the OECD's Centre for Tax Policy and Administration, Grace Perez-Navarro. The Republic of Peru is the 114th jurisdiction to join the Convention, and the 12th Latin American jurisdiction to do so.
The Convention is an instrument for international tax co-operation that was developed jointly by the OECD and the Council of Europe in 1988 and amended in 2010 to respond to the call by the G20 to align it to the international standard on exchange of information.
The Convention provides all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange (including pursuant to the OECD/G20 Standard for Automatic Exchange of Financial Account Information in Tax Matters), tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.
As such, it guarantees extensive safeguards for the protection of taxpayers' rights and provides a legal basis for other forms of cross-border tax cooperation, including assistance in the collection of taxes, or the undertaking of joint tax examinations with partner administrations.
By signing the Convention today, Peru strongly reaffirms its commitment to fight international offshore tax avoidance and evasion. The Convention will allow Peru to rapidly expand its network of information exchange partners and to swiftly implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project , in particular the automatic exchange of Country-by-Country reports under Action 13, which we intend to start as from next year.
L-R: Claudia María Amelia Teresa Cooper Fort (Minister of Economy and Finance, Peru), Mercedes Araoz (Prime Minister, Peru), Grace Perez-Navarro (Deputy Director, OECD Centre for Tax Policy and Administration)
The 114 jurisdictions participating in the Convention can be found at: www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf
Friday, October 6, 2017
Notice 2017-46 provides guidance for financial institutions required to collect taxpayer identification numbers (TINs) and dates of birth under temporary regulations under Chapter 3 or a Model 1 Intergovernmental Agreement (IGA) as follows:
(1) With respect to foreign financial institutions (FFIs), this notice provides that FFIs in Model 1 IGA jurisdictions will not be in significant non-compliance with an applicable IGA during 2017, 2018, and 2019 solely as a result of a failure to report U.S. TINs for preexisting accounts, provided the FFI reports the account holder’s date of birth, makes annual requests for the TIN, and searches its electronic records for missing U.S. TINs before reporting information on 2017.
(2) With respect to U.S. financial institutions, this notice delays the start date of the requirement to collect foreign TINs for account holders to January 1, 2018, provides a phase-in period for obtaining foreign TINs from account holders documented prior to January 1, 2018, and narrows the circumstances in which a foreign TIN is required.
Taxpayers may rely on the provisions of this notice prior to the issuance of amendments to the temporary Chapter 3 regulations reflecting the notice.
Notice 2017-46 will be in IRB 2017-41, dated October 10, 2017.
Current Status of FATCA an CRS (Sept 2017 edition) https://ssrn.com/abstract=3045459
Wednesday, September 27, 2017
First automatic Common Reporting Standard exchanges between 49 jurisdictions set to take place this month; now over 2000 bilateral exchange relationships in place
In 2014, the OECD and the G20 approved the Common Reporting Standard (CRS), which will be the basis for the automatic annual exchange of information on offshore financial accounts to the tax authorities of the residence country of account holders. At present, 102 jurisdictions have publicly committed to implement the CRS, with 49 being committed to start exchanges this month and a further 53 taking up exchanges in September 2018.
The successful implementation of the CRS requires both domestic legislation to ensure that financial institutions correctly identify and report accounts held by non-residents, and an international legal framework for the automatic exchange of CRS information. The preferred route to put the international legal framework in place is through the CRS Multilateral Competent Authority Agreement (CRS MCAA), which defines the scope, timing, format and conditions for the exchange of CRS information and is based on the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the prime instrument for cooperation in tax matters. At present, 95 jurisdictions have signed the CRS MCAA.
While the CRS MCAA is a multilateral agreement, exchange relationships for CRS information are bilateral in nature and are activated when both jurisdictions have the domestic framework for CRS exchange in place and have listed each other as intended exchange partners.
Today, we are pleased to announce that another series of bilateral exchange relationships was established under the CRS MCAA. In total, there are now over 2000 bilateral relationships for the automatic exchange of CRS information in place across the globe. The full list of automatic exchange relationships that are currently in place under the CRS MCAA is available online.
With first exchanges for jurisdictions committed to a 2017 timeline now being only weeks away, all 49 have now activated their exchange relationships under the CRS MCAA and the network of bilateral exchange relationships (also including those established through the EU DAC2 Directive and bilateral agreements) now covers over 99% of the total number of possible exchange relationships. In addition, 20 of the 53 jurisdictions committed to first exchanges in 2018 have already put the international legal requirements in place to commence exchanges under the CRS MCAA next year. A further activation round for jurisdictions committed to a 2018 timeline is scheduled to take place in November 2017 which will allow the remaining jurisdictions to nominate the partners with which they will undertake automatic exchanges of CRS information.
Today's wave of activations of bilateral exchange relationships is a key milestone for the successful and timely implementation of the CRS in the 49 jurisdictions committed to first exchanges this month and marks the delivery on their political commitment to fight tax evasion.
Monday, September 18, 2017
Her Excellency Datin Paduka Malai Halimah Malai Yussof, Ambassador Extraordinary and Plenipotentiary of Brunei Darussalam to France, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of OECD Deputy Secretary-General, Mr. Masamichi Kono. Brunei Darussalam is becoming the 113rd jurisdiction to join the Convention.
The Convention is the most powerful instrument for international tax cooperation. It provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.
Wednesday, August 23, 2017
The public, especially the BVI Financial Institutions that have reporting obligations to be satisfied in the year 2017 are being notified that the authority’s email and the web-based portal the BVI Financial Account Reporting System (BVIFARS) are down, as a result of the Tropical Wave that affected the Territory last week. See the news flash.
The authority is therefore extending the reporting deadline for the year 2017 from Friday, August 18 to Friday, September 1.
The extension is for those persons and financial institutions who will be reporting under the following arrangements:
- The Common Reporting Standards (CRS); and
- The Agreement between the Government of the British Virgin Islands and the Government of the United Kingdom of Great Britain and Northern Ireland to improve international tax compliance (UK CDOT).
The authority said that it is working to get its systems back online as soon as possible.
Tuesday, August 22, 2017
The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) published the first 10 outcomes of a new and enhanced peer review process aimed at assessing compliance with international standards for the exchange of information on request between tax authorities.
The new round of peer reviews – launched in mid-2016 – follows a six-year process during which the Global Forum assessed the legal and regulatory framework for information exchange (Phase 1) as well as the actual practices and procedures (Phase 2) in 119 jurisdictions worldwide.
The Global Forum’s new peer review process combines the Phase 1 and Phase 2 elements into a single undertaking, with new focus on an assessment of the availability of and access by tax authorities to beneficial ownership information of all legal entities and arrangements, in line with the Financial Action Task Force international standard.
The Global Forum reviewed exchange of information practices through combined peer review reports in ten jurisdictions Three jurisdictions – Ireland, Mauritius and Norway – received an overall rating of “Compliant.” Six others – Australia, Bermuda, Canada, Cayman Islands, Germany and Qatar were rated “Largely Compliant.” Jamaica was rated “Partially Compliant,” leading the Global Forum to launch a supplementary report on follow-up measures to ensure a higher level of compliance.
Global Forum members are working together to monitor and review implementation of the international standard for the automatic exchange of financial account information, under the Common Reporting Standard (CRS), which will start in September 2017. The monitoring and review process is intended to ensure the effective and timely delivery of commitments made, the confidentiality of information exchanged and to identify areas where support is needed.
The Global Forum is assisting developing country members to ensure that they can also receive the benefits of the ongoing global move to automatic exchange of financial account information.
For additional information on the Global Forum peer review process, and to read all reports to date, go to: http://www.oecd-ilibrary.org/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-peer-reviews_2219469x.
Monday, August 21, 2017
The Beneficial Ownership of Legal Persons (Guernsey) Law, 2017 In Effect and Registry Now Recording UBOs
The Beneficial Ownership of Legal Persons (Guernsey) Law 2017 came into force on 15 August, and the associated limited-access electronic registry service is now live. It imposes a statutory duty on resident agents to keep an up-to-date record of the beneficial owners of legal entities for which they are responsible, essentially setting a 25 % threshold for beneficial ownership. EXPLANATORY MEMORANDUM
The Law establishes the Office of the Registrar of Beneficial Ownership of Legal Persons, sets out the powers and functions of the Registrar, and imposes new duties on beneficial owners of legal persons and resident agents relating to the provision of information. The Law also makes appropriate amendments to the "relevant legal person Laws" - ie the Companies (Guernsey) Law, 2008, the Limited Liability Partnerships (Guernsey) Law, 2013 and the Foundations (Guernsey) Law, 2012 - and makes amendments to other legislation to ensure that the Guernsey Financial Services Commission has appropriate supervisory powers in respect of persons it regulates.
Part 1 of the Law establishes the Office of the Registrar and sets out the Registrar's functions. Part 2 sets out the duties of resident agents and beneficial owners to collect and disclose information. These duties expand on existing duties in the relevant legal persons Laws (eg Part XXIX of the Companies Law). The duties are enforced by a civil penalties regime and, in respect of resident agents, criminal offences. Part 3 amends the existing resident agent and beneficial ownership provisions in the relevant legal person Laws, making them consistent with the duties under Part 2 and the functions of the Registrar. Part 4 is concerned with the enforcement of the provisions, including a range of flexible civil sanctions consistent with those in the Companies Law, such as the power to issue private reprimands. The general provisions at Part 5 include providing for the meaning of 'beneficial owner' and related expressions to be defined by regulations.
Schedule 1 makes standard provision in respect of the Office of the Registrar. Schedule 2 sets out in more detail the general powers of the Registrar to disclose, and obtain, information, as well as the duty on him to keep information secure and confidential; the powers to disclose are consistent with powers in existing legislation such as the Disclosure Law. Also in Schedule 2 is an express power for the GFSC and the Economic Crime Division of the Customs and Immigration Service to inspect the Register for the purposes of carrying out their functions. Schedule 3 sets out amendments to the Foundations Law and Schedule 4 sets out amendments to other enactments, made for the broad purpose of ensuring that the GFSC has suitable supervisory powers in respect of persons it regulates.
Wednesday, August 16, 2017
Swiss Asset Management Firm Trades Client Accounts and Info of US Tax Evaders for Leniency In Its Criminal Investigation
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James D. Robnett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Prime Partners SA (“Prime Partners”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2010. The NPA was based on Prime Partners’ extraordinary cooperation, including its voluntary production of approximately 175 client files for non-compliant U.S. taxpayer-clients, and provides that Prime Partners will not be criminally prosecuted. The NPA requires Prime Partners to forfeit $4.32 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $680,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by Prime Partners’ U.S. taxpayer-clients.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Prime Partners admits to helping its clients conceal their ownership of foreign bank accounts to avoid their U.S. tax obligations. They created sham entities and even counseled their clients to use pay phones and prepaid debit cards to avoid detection of their tax fraud scheme. The resolution of this matter through a non-prosecution agreement, along with forfeiture and restitution, reflects the extraordinary cooperation provided by Prime Partners to our investigation. It should serve as proof that cooperation has tangible benefits. We will continue to pursue financial services firms around the world that help their clients evade U.S. taxes.”
Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “The message is clear to those using foreign bank accounts to engage in schemes to evade U.S. taxes – you can no longer assume your ‘secret’ accounts will remain concealed, no matter where they are located. In our ongoing investigations, we will continue to draw on information from a variety of sources and to provide substantial credit to those around the globe who provide full and timely cooperation regarding the identity of U.S. tax cheats and the phony trusts and shell companies they seek to hide behind.”
IRS-CI Special Agent in Charge James D. Robnett said: “Today’s NPA signals the continued erosion of the tax secrecy safe havens that helped facilitate this criminal activity at a significant cost to the US taxpayer. IRS-CI is focused on tracking funds of individuals hiding income offshore and will continue to investigate international tax evasion.”
As part of the NPA, Prime Partners admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, Prime Partners admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of Prime Partners in order to evade their U.S. tax obligations, in violation of U.S. law. Prime Partners acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things:
(i) creating sham entities, which had no business purpose, that served as the nominal account holders for the accounts;
(ii) advising U.S. taxpayer-clients not to retain their account statements, to call Prime Partners collect from pay phones, and to destroy any faxes they received from Prime Partners;
(iii) providing U.S. taxpayer-clients with prepaid debit cards, which were funded with money from the clients’ undeclared accounts; and
(iv) facilitating cash transfers in the United States between U.S. taxpayer-clients with undeclared accounts.
The NPA recognizes that, in early 2009, Prime Partners voluntarily implemented a series of remedial measures to stop assisting U.S. taxpayers in evading federal income taxes. The NPA further recognizes the extraordinary cooperation of Prime Partners, including its voluntary production of approximately 175 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers.
As part of the NPA, Prime Partners has agreed to forfeit $4.32 million to the United States, representing a portion of the gross revenues from services that it provided to U.S. taxpayers with undeclared foreign bank accounts from 2001 through 2010. In connection with this forfeiture, Prime Partners has agreed not to contest a civil forfeiture action to be filed by the United States.
The U.S. Attorney’s Office entered into the NPA based on factors including:
- Prime Partners’ voluntary and extraordinary cooperation, including its voluntary production of account files containing the identities of U.S. taxpayer-clients;
- Prime Partners’ voluntary implementation of various remedial measures beginning in or around early 2009, before the investigation of its conduct began;
- Prime Partners’ willingness to continue to cooperate to the extent permitted by applicable law; and
- Prime Partners’ representation – based on an investigation by outside counsel, the results of which have been reviewed by the U.S. Attorney’s Office and the Tax Division – that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts.
The NPA requires Prime Partners to continue to cooperate with the United States for at least three years from the date of the agreement. In the event that Prime Partners violates the NPA, the U.S. Attorney’s Office may prosecute Prime Partners.
Mr. Kim thanked the IRS for its outstanding work in the investigation of this matter and the Tax Division of the Department of Justice for its assistance in the investigation.
Saturday, August 12, 2017
The Internal Revenue Service began mailing letters this month to more than 1 million taxpayers with expiring Individual Taxpayer Identification Numbers and urges recipients to renew them as quickly as possible to avoid tax refund and processing delays.
ITINs with middle digits 70, 71, 72 or 80 are set to expire at the end of 2017. The notice being mailed -- CP-48 Notices, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return -- explains the steps taxpayers need to take to renew the ITIN if it will be included on a U.S. tax return filed in 2018.
The notices will be issued over a five-week period beginning in early August. Taxpayers who receive the notice but have acted to renew their ITIN do not need to take further steps unless another family member is affected.
“We urge people who receive this letter to renew their ITIN as quickly as possible to avoid tax refund and processing delays next year,” said IRS Commissioner John Koskinen. “Taking steps now and renewing early will make things go much more smoothly for ITIN holders when it comes time to file their taxes.”
Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years will expire Dec. 31, 2017, and as mentioned above, ITINs with middle digits 70, 71, 72 or 80 will also expire at the end of the year. Affected taxpayers who expect to file a tax return in 2018 must submit a renewal application.
As a reminder, ITINs with middle digits 78 and 79 that expired at the end of last year can be renewed at any time.
Who Needs an ITIN?
ITINs are used by people who have tax filing or income reporting obligations under U.S. law but are not eligible for a Social Security number (SSN). ITIN holders should visit the ITIN information page on IRS.gov and take a few minutes to understand the guidelines.
Who Should Renew an ITIN?
Taxpayers with ITINs set to expire and who need to file a tax return in 2018 must submit a renewal application. Others do not need to take any action.
- ITINs with middle digits 70, 71, 72, or 80 (For example: 9NN-70-NNNN) need to be renewed if the taxpayer will have a filing requirement in 2018.
- Taxpayers whose ITINs expired due to lack of use should only renew their ITIN if they will have a filing requirement in 2018.
- Taxpayers who are eligible for, or who have, an SSN should not renew their ITIN, but should notify IRS both of their SSN and previous ITIN, so that their accounts can be merged.
- Taxpayers whose ITINs have middle digits 78 or 79 that have expired should renew their ITIN if they will have a filing requirement in 2018.
Family Option Remains Available
Taxpayers with an ITIN with middle digits 70, 71, 72, 78, 79 or 80 have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family’s ITINs together even if family members have an ITIN with middle digits other than 70, 71, 72, 78, 79 or 80. Family members include the tax filer, spouse and any dependents claimed on the tax return.
How to Renew an ITIN
To renew an ITIN, taxpayers must complete a Form W-7 and submit all required documentation; taxpayers are not required to attach a federal tax return.
The IRS is currently accepting ITIN renewals. There are three ways to submit the W-7 application package:
- Mail the Form W-7, along with original identification documents or copies certified by the issuing agency, to the IRS address listed on the Form W-7 instructions. The IRS will review the identification documents and return them within 60 days.|
- Taxpayers have the option to work with Certified Acceptance Agents(CAAs)
authorized by the IRS to help them apply for an ITIN. CAAs can certify all identification documents for primary and secondary taxpayers and certify that an ITIN application is correct before submitting it to the IRS for processing. A CAA can also certify passports and birth certificates for dependents. This saves taxpayers from mailing original documents to the IRS.
- In advance, taxpayers can call and make an appointment at a designated IRS Taxpayer Assistance Center instead of mailing original identification documents to the IRS.
Avoid Common Errors Now; Prevent Delays Next Year
Several common errors can delay some ITIN renewal applications. The mistakes generally center on missing information and/or insufficient supporting documentation. Here are a few examples of mistakes taxpayers should avoid:
- Filing with an expired ITIN. Federal returns that are submitted in 2018 with an expired ITIN will be processed. However, exemptions and/or certain tax credits will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, any applicable exemptions and credits will be restored and any refunds will be issued.
- Missing a reason for applying. A reason for needing the ITIN must be selected on the Form W-7.
- Missing a complete foreign address. When renewing an ITIN, if Reason B (non-resident alien) is marked, the taxpayer must include a complete foreign address on their Form W-7.
- Mailing incorrect identification documents. Taxpayers mailing their ITIN renewal applications must include original identification documents or certified copies by the issuing agency and any other required attachments. They must also include the ITIN assigned to them and the name under which it was issued in 6e-f.
Taxpayers should review the Form W-7 instructions for detailed information and carefully check their package before submitting it.
As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise the following additional documents to prove U.S. residency are required:
- U.S. medical records for dependents under age 6,
- U.S. school records for dependents under age 18, and
- U.S. school records (if a student), rental statements, bank statements or utility bills listing the applicant’s name and U.S. address, if over age 18
IRS Encourages More Applicants for the Acceptance Agent Program to Expand ITIN Services
To increase the availability of ITIN services nationwide, particularly in communities with high ITIN usage, the IRS is actively recruiting Certified Acceptance Agents. Applications are now accepted year-round. Interested individuals, community outreach partners and volunteers at tax preparation sites are encouraged to review program changes and requirements.
The IRS continues to work with partner groups and others in the ITIN community to share information about these important changes. To assist taxpayers, the IRS has a variety of informational materials, including flyers and fact sheets available in several languages on the ITIN information page on IRS.gov.
Saturday, July 29, 2017
California Resident Indicted for Impeding the Internal Revenue Laws and Filing False Tax Returns that Did Not Report Secret German and Israeli Accounts
A Beverly Hills, California resident was indicted by a federal grand jury in the Central District of California for corruptly endeavoring to impede the internal revenue laws, filing false tax returns, filing false reports regarding his offshore bank accounts and making false statements to a federal agent, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Sandra R. Brown for the Central District of California.
The indictment charges that from 2006 through 2014, Teymour Khoubian impeded the administration of the internal revenue laws. According to the indictment, Khoubian filed false individual tax returns with the Internal Revenue Service (IRS) for tax years 2005 through 2010 that did not report his financial interest in multiple Israeli and German bank accounts or the interest income that he earned from those accounts. He also allegedly falsely claimed refundable tax credits to which he was not entitled, including the Earned Income Tax Credit, which is intended for low-to moderate-income working individuals. In 2008, Khoubian is alleged to have held approximately $20 million in assets in his undisclosed accounts. The indictment charges that Khoubian also filed a false 2011 tax return that underreported the interest income he earned from his Israeli accounts and continued to fail to disclose that he held an account in Germany. Khoubian is also alleged to have filed false 2012 and 2013 Reports of Foreign Bank and Financial Accounts forms (FBARs) with the U.S. Department of Treasury that concealed his German account. U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file an FBAR disclosing the account.
In addition to filing false tax returns and FBARs, Khoubian allegedly provided his German bank with a copy of his Iranian passport and a residential address located in Israel to prevent the bank from disclosing the account to the IRS. He also allegedly sent a letter to Bank Leumi falsely claiming he was living in Iran when, in fact, he resided in Beverly Hills, California.
Khoubian is also charged with making false statements to an IRS Criminal Investigation (CI) special agent – denying that he owned an account in Germany between 2005 and 2010, stating that the German account was closed, when it was in fact still open, and stating that the funds had been transferred to the United States, when Khoubian had allegedly transferred over $600,000 from his German account to his accounts in Israel.
If convicted, Khoubian faces a statutory maximum sentence of three years in prison for corruptly endeavoring to impede the internal revenue laws and each count of filing a false return and five years in prison for each count of filing a false FBAR and making a false statement. He also faces a period of supervised release, restitution and monetary penalties.
The charges contained in the indictment are only allegations. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Brown thanked special agents of IRS CI, who conducted the investigation, and Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of the Tax Division and Assistant U.S. Attorney Robert Conte, who are prosecuting this case.
Tuesday, July 25, 2017
Former Credit Suisse Banker Pleads Guilty to Conspiring with U.S. Taxpayers and Other Swiss Bankers to Defraud the United States
A citizen and resident of Switzerland pleaded guilty today to conspiring to defraud the United States in connection with her work as the head of a team of bankers for Credit Suisse AG, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente for the Eastern District of Virginia.
According to the statement of facts and the plea agreement, Susanne D. Rüegg Meier, admitted that from 2002 through 2011, while working as the team head of the Zurich Team of Credit Suisse’s North American desk in Switzerland, she participated in a wide-ranging conspiracy to aid and assist U.S. taxpayers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. Rüegg Meier was responsible for supervising the servicing of accounts involving over 1,000 to 1,500 client relationships. She was also personally responsible for handling the accounts of approximately 140 to 150 clients, about 95 percent of whom were U.S. persons residing primarily in New York, Chicago and Florida, which held assets under management totaling approximately $400 million. Rüegg Meier admitted that the tax loss associated with her criminal conduct was between $3.5 and $9.5 million.
Rüegg Meier assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of their undeclared financial accounts from the U.S. Department of the Treasury and the Internal Revenue Service (IRS). She took the following steps to assist clients in hiding their Swiss accounts: retaining in Switzerland all mail related to the account; structuring withdrawals in the forms of multiple checks each payable in amounts less than $10,000 that were sent by courier to clients in the United States and arranging for U.S. customers to withdraw cash from their Credit Suisse accounts at Credit Suisse locations outside Switzerland, such as the Bahamas. Moreover, Rüegg Meier admitted that approximately 20 to 30 of her U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities or other structures that were frequently created in the form of foreign partnerships, trusts, corporations or foundations.
Between 2002 and 2008, Rüegg Meier traveled approximately twice per year to the United States to meet with clients. Among other places, Rüegg Meier met clients in the Credit Suisse New York representative office. To prepare for the trips, Rüegg Meier would obtain “travel” account statements that contained no Credit Suisse logos or customer information, as well as business cards that bore no Credit Suisse logos and had an alternative street address for her office, in order to assist her in concealing the nature and purpose of her business.
After Credit Suisse began closing U.S. customers’ accounts in 2008, Rüegg Meier assisted the clients in keeping their assets concealed. For example, when one U.S. customer was informed that the bank planned to close his account, Rüegg Meier assisted the customer in closing the account by withdrawing approximately $1 million in cash. Rüegg Meier advised the client to find another bank simply by walking along the street in Zurich and locating a bank that would be willing to open an account for the client. The customer placed the cash into a paper bag and exited the bank. Rüegg Meier also recommended that a few U.S. clients open new accounts at other specific banks, such as Bank Frey and Wegelin & Co., and transfer their assets from their Credit Suisse accounts to the new accounts.
Credit Suisse pleaded guilty in May 2014 for conspiring to aid and assist taxpayers in filing false returns, and was sentenced in November 2014 to pay more than $2 billion in fines and restitution.
Sentencing is scheduled for Sept. 8. Rüegg Meier faces a statutory maximum sentence of five years in prison. She also faces a period of supervised release, restitution and monetary penalties.
Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Boente commended special agents of IRS Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Trial Attorney Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Mark Lytle of the Eastern District of Virginia, who are prosecuting this case.