Switzerland, Austria and Luxembourg agreed to share secret banking information in cases of tax evasion on Friday. Basically, these havens are agreeing to the OECD standards on financial information sharing. Of course, this is not an open season on the bank and financial information. These countries will consider various requests from other countries for banking information on a case by case basis.
The IRS has information sharing agreements with many tax havens, or as they like to call themselves–offshore financial centers. None of the countries, however, automatically turn over bank or financial upon a request from the IRS. There is a lot more to the process and procedure. Using various laws and procedures, the person or business subject of the request can delay or stop the requests. When I was a trial attorney for the Office of Chief Counsel, IRS, International Division I was involved in many local countries court proceeding challenging the IRS request. Some challenges are successful.
Anyway, read the NY Times story on the recent Swiss agreement:
The Swiss government bowed to pressure on Friday and agreed to conform to international standards on exchanging information in suspected cases of tax evasion, but it maintained that its principle of banking secrecy was in tact.
Two other countries, Austria and Luxembourg, announced steps to fend off a global crackdown on tax evasion by offering concessions before a meeting of leaders from the Group of 20 nations in London at the start of next month.
Read the whole story Click Here NYT
In another story, the Cayman Islands “Leader of Government Business,” Kirk Tibbets, announced that he and others from the Caymans met with US Congress to brief new members about the Cayman’s laws, positions and cooperation in sharing information under various agreements:
Part of the press release said: “[Purpose] to brief new members of key House and Senate committees about the quality of Cayman’s regulatory and international cooperation regimes, with specific reference to our longstanding and effective arrangements with the United States, and to glean any available intelligence on the US position in relation to the April G20 Summit.
My colleagues and I covered, between us, 30 meetings over two days. The people we met were receptive to what we had to say and appeared to have no particular ‘anti-Cayman’ – or even ‘anti- offshore’ – agenda. That is not to say that there are not those members of Congress who do, but they do not appear to reflect the majority sentiment. What came through most forcefully was that the policy environment in Washington is very fluid at the moment, and most of people’s energies and attentions are, understandably, taken up with the US economy, budget and financial system.”
Read the whole press release: Click Here
No legal opinion here
You may not think international tax law applies to you, but it may. Do you have a bank account outside of the United States? If so, you are supposed to report it on your tax return. There is a check box on the tax return to report any foreign bank accounts. If you do not report your account, the IRS may come calling on you.
I worked as an attorney in the International Division of Office of Chief Counsel, IRS, for many years. As such, I assisted the IRS in gathering information from many foreign countries including most of the the Caribbean jurisdictions. So, there is a process for the IRS to collect foreign bank account and business/financial information.
The IRS has many ways to find out about your foreign activities. Many foreign countries have tax treaties with the US. All the treaties have an “exchange of information” section. The taxing authority of each country often spontaneously furnishes business and financial information to the IRS. Well, the IRS takes it from there. In addition, the IRS has Tax Information Exchange Agreements with many foreign jurisdictions. Offshore financial centers like the Cayman Islands, Bahamas, Bermuda and many other counties signed these agreements. Basically, the IRS can request business, banking or financial information from the foreign tax authority. The foreign tax authority will get the information and give it to the IRS.
So, do not think your financial or business information is out of the IRS’ grasp just because the information is in another country.
More on this interesting subject will be in another post soon. Keep coming back and read about it.