Democratic Michigan senator Carl Levin has trotted out his so-called Stop Tax Haven Abuse Act periodically over the last few years, including in 2005 and 2007, when one of its sponsors was then-senator Barack Obama. Last week, he unveiled a 2011 version, which he said contained new features that would target "tax dodgers using offshore trickery and abusive tax shelters" to "avoid paying their fair share".
Importantly for some financial services jurisdictions, this latest version act does not contain a list of “secrecy jurisdictions”, a fact that has been welcomed by politicians and spokesmen for businesses on both Jersey and Guernsey.
Among them was Jersey treasury minister Philip Ozouf, who said in a statement: “We are delighted to see that we have been listened to, along with other jurisdictions that were also on the list who have made similar representations to Washington, and that there is now greater understanding of our position as an open and transparent regime." Ozouf’s reaction was echoed by officials in Guernsey, where chief minister Lyndon Trott recently returned from discussions with representatives from Sen Levin’s office.
Levin is chairman of the Senate’s Permanent Subcommittee on Investigations, which has estimated that offshore tax abuses cost the US government $100bn a year.
To see a copy of his latest Stop Tax Haven Abuse Act, click here.
As reported, non-US banks and other financial institutions, including asset management houses and trust businesses, are beginning to address the need to comply with the requirements of another piece of US legislation, FATCA, or Foreign Accounts Tax Compliance Act, which was signed into law last year and takes effect on 1 Jan 2013.
Last week, US officials issued long-awaited guidance on FATCA that effectively pushed back compliance obligations in some cases by a year.
Key features of the latest Stop Tax Haven Abuse Act:
- Would authorise the Treasury Secretary to take special measures against foreign jurisdictions or financial institutions that impede US tax enforcement
- Would stop corporations whose management and control are located primarily in the US from claiming status as foreign corporations, and instead treading them as domestic corporations for tax purposes
- Would close an existing tax loophole that allows credit default swap payments to escape taxation if sent from the United States to persons offshore, such as an offshore hedge fund or foreign bank, by treading such payments as taxable, US-source income
- Would address US dollars and other assets that are supposedly kept offshore by foreign subsidiaries of US corporations but which, in reality, are deposited into accounts physically located in the US
- Would strengthen penalties on tax shelter promoters and "aider and abettors of tax evasion" by increasing the maximum fine to 150% of any ill-gotten gains
- Would strengthen the ability of the IRS to enforce the Foreign Bank Account Report (FBAR) requirements and clarify the right of access by IRS civil enforcement authorities to Suspicious Activity Reports
