Foreign Tax Cheats Can Be Prosecuted Under US Tax Law, Supreme Court Rules

by Glen Shapiro, LawAndTax-News.com, New York

28 April 2005

Ruling in the case of Pasquantino v. United States of America on Tuesday, the US Supreme Court stated that those who use the United States to evade foreign taxes can be prosecuted using US wire fraud laws.

The court upheld the convictions of US residents David and Carl Pasquantino, who were found guity of covertly shipping around 40,000 cases of liquor from the United States to the Canadian black market, thus evading around $6 million in Canadian alcohol tax.

Writing for the 5-4 Supreme Court panel majority, Justice Clarence Thomas observed that:

"It may seem an odd use of the federal government's resources to prosecute a US citizen for smuggling cheap liquor into Canada. But the broad language of the wire fraud statute says so."

Writing on Tuesday on behalf of the dissenting panel members, however, Justice Ruth Bader-Ginsberg argued that:

"Today's novel decision is all the more troubling for its failure to take account of Canada's primary interest in the matter at stake. Canadian courts are best positioned to decide whether, and to what extent, the defendants have drafrauded the governments of Canada and Ontario out of tax revenues owed pursuant to their own, sovereign, excise laws."

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