One of the most prominent US political campaigners against offshore tax jurisdictions, Senator Carl Levin (Dem, MI) last week unveiled the Stop Tax Haven Abuse Act in Congress, claiming the US loses about $150 billion a year in lost revenue from such abuse.
One of the most prominent US political campaigners against offshore tax jurisdictions, Senator [tag|Carl Levin|]Carl Levin[/tag] (Dem, MI) last week unveiled the Stop Tax Haven Abuse Act in Congress, claiming the US loses about $150 billion a year in lost revenue from such abuse.
Levin, along with Senators Sheldon Whitehouse (D-RI), Mark Begich (D-AL) and Jeanne Shaheen (D-NH), told the Senate his legislation, if enacted, will “authorise special measures to stop offshore tax abuse by allowing [the US] Treasury to take specified steps against foreign jurisdictions or financial institutions that impede US tax enforcement, including prohibiting US banks from doing business with a designated foreign bank”.
“This bill eliminates incentives to send US profits and jobs offshore, combats offshore tax abuses, and raises revenues needed to fund our national security and essential domestic programs. Its provisions could be part of an alternative deficit reduction package to substitute for sequestration this year, but should be adopted in any event because the loopholes we would close serve no economic purpose and shouldn’t exist even if there were no deficit,” Levin said, according to a statement on his official website.
The bill will also, Levin said, strengthen the Foreign Account Tax Compliance Act – which became law in 2010 and has been a controversial compliance measure – by clarifying when foreign financial institutions and US persons must report foreign financial accounts to the IRS.
The bill comes at a time when the FATCA Act, which requires foreign financial institutions to check that any expat US clients and Green Card holders are fully compliant in tax affairs, has been criticised as heavy-handed. Already, FFIs such as Deutsche Bank and HSBC, among others, no longer serve such clients, although others, such as RBC Wealth Management and London & Capital, continue to do so.
Some groups, such as the CATO Institute think tank in Washington, DC, argue that the attacks on offshore tax centers are hypocritical, given that the US operates what amounts to being a tax haven in the form of Delaware, for example. It is also argued that increasingly onerous tax compliance legislation is driving wealthy Americans abroad and encouraging them to renounce their citizenship, costing the Treasury more in the long run.
Group of 20 nations, recently meeting in Russia, have renewed their calls for more transparency on international tax issues. The US and Switzerland have also recently inked an agreement to draw a line under a long-running dispute between the US and Swiss banks over Swiss bank secrecy laws and undisclosed accounts.