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World Leaders Ramp Up International Tax Evasion Investigations

March 29, 2017


In light of the struggling world economy, world leaders are focusing their efforts on collecting unpaid taxes from those who have foreign assets and offshore accounts. Tax evasion is considered an international problem and countries have been using a variety of approaches to battle it.

International Tax Collection Efforts

Countries have taken different approaches to collect taxes from citizens with offshore accounts. Germany, Britain and Switzerland signed a tax-enforcement treaty earlier in 2011, through which Germany and Britain could collect taxes on assets in Switzerland without Switzerland waiving financial privacy. Britain also invested £900 million in new computer systems and technology that it believes will help recover over £1 billion in tax revenue annually. The British Tax Authority also formed a 200-agent-member “Affluence Team” to review the financial information of wealthy Britains to ensure tax compliance.

Greece seeks an agreement with Switzerland similar to the agreement Switzerland has with Germany and Britain. Greece has also published a list of corporations delinquent in taxes, in an effort to shame them into paying. Italy passed a law requiring banks to use bank cards or some other traceable service when issuing payments over £2,500 to customers, in order to create a paper trail of the transactions for taxation purposes.

The Group of Twenty Finance Ministers and Central Bank Governors (G 20) has taken action on tax evasion as well, beginning with the April 2009 meeting in London. As a result of the London meeting, 700 different agreements regarding information exchanging formed. The G 20 also addressed tax evasion in its November 2011 summit in Cannes. At that meeting, the member countries fashioned a multi-lateral treaty aimed at helping countries prevent tax evasion more effectively.

The U.S. has taken a multi-faceted approach to combating the problem of international tax evasion. In 2011, the IRS offered the Offshore Voluntary Disclosure Initiative (OVDI), whereby U.S. taxpayers with undisclosed offshore assets could become current in their tax obligations and avoid criminal prosecution in exchange for paying a reduced civil penalty. U.S. officials have also chosen to pursue criminal convictions against those who commit tax evasion and the people and institutions that help them do it after the amnesty period of OVDI closed.

Targeted Foreign Banks

The U.S. has used information obtained from participants in the OVDI to go after individuals and banks who helped U.S. taxpayers set up offshore accounts to evade taxes. In November 2011, the U.S. asked the Swiss government for information about U.S. taxpayers who indirectly held Swiss accounts through corporations from 2002-2010. The Swiss government ordered Credit Suisse, the country’s second-largest bank, to furnish the information.

The U.S. government had informed Credit Suisse as early as July 2010 that the U.S. was looking at the bank in the context of tax evasion investigations after the U.S indicted four bankers with ties to Credit Suisse for helping U.S. taxpayers evade taxes through offshore accounts.

The U.S. Department of Justice (DOJ) has opened federal grand jury investigations on eight international banks. Some of the banks under investigation include Julius Baer Group Ltd. (BAER), Wegelin & Co., Basler Kantonalbank and Zuercher Kantonalbank. Switzerland’s largest bank, UBS, avoided prosecution after the DOJ brought charges against it in 2009 for facilitating tax evasion by admitting to helping others evade taxes, paying $758 million and furnishing the IRS with information on U.S. account-holders.

Criminal Charges and Penalties

The U.S. government can charge people who hide assets offshore with a variety of crimes, including tax evasion, willful failure to pay taxes and fraud. The penalties for these crimes are severe. Those convicted of tax evasion or willful failure to pay taxes face up to five years in federal prison and a fine up to $250,000. Fraud convictions can result in a three year federal prison sentence and a fine of up to $250,000. The IRS can also choose to impose stringent civil penalties for those convicted of tax crimes.

An Attorney Can Help

The attention that leaders around the world are giving offshore assets shows that authorities are serious about eliminating international tax evasion. Authorities in the U.S. and abroad are vigorously pursuing those whom they suspect of tax evasion. If you are facing criminal charges for tax matters, contact an experienced criminal defense attorney immediately to help protect your rights.