Recently appointed head of the US Internal Revenue Service (IRS), John Koskinen, said at a tax conference in Washington D.C. that re-striking the balance between enforcement and voluntary compliance was “particularly important at this point in time”, given the approaching July 1 effective date of FATCA.
Since its establishment in 2009, the offshore voluntary disclosure programme (OVDP) has resulted in more than 43,000 voluntary disclosures from individuals who paid more than $6bn in back taxes, interest, and penalties, Koskinen revealed, adding that the numbers continue to rise.
The OVDP gave US citizens the opportunity to voluntarily reveal their undisclosed offshore accounts, pay a financial penalty, and avoid prosecution. Further voluntary programmes followed in 2011 and 2012.
The IRS noted a significant uptick in participation since the Department of Justice announced its programme for Swiss banks last August.
Koskinen said the IRS is considering "whether our voluntary programs have been too focused on those wilfully evading their tax obligations and are not accommodating enough to others who don’t necessarily need protection from criminal prosecution because their compliance failures have been of the non-wilful variety”.
One example was the many US citizens who have resided abroad for many years, where the IRS had been considering whether three of these individuals should not have to face the type of penalties that were appropriate for US resident taxpayers who were wilfully hiding their investments overseas.
There were also the US-resident taxpayers with unreported offshore accounts “whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties”.
Koskinen said: “We expect we will have much more to say on these programme enhancements in the very near future. So stay tuned.”
There was relief in July last year when the US gave non-US financial institutions around the world another six months to prepare to comply fully with FATCA, pushing the deadline back to 1 July, 2014.
This article was originally published on June 26 2014.
