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Levin Launches New Anti-Tax Haven Salvo,
by Mike Godfrey, Tax-News.com, Washington
Wednesday, March 04, 2009
US Senator Carl Levin, the long-time enemy of offshore territories, has once
again declared war against the tax haven with the introduction of a strengthened
'Stop Tax Haven Abuse Act' and, with the backing of the President and a Democrat
majority, this time he might succeed.
Stating that “tax havens are engaged in economic warfare against the
United States, and honest, hardworking Americans,” Levin was joined by
three Democratic Senators, including Sheldon Whitehouse, Claire McCaskill and
Bill Nelson in introducing comprehensive new legislation which aims to recover
an estimated USD100bn in tax revenues supposedly lost by the United States each
year as a result of 'tax haven abuse' by US corporations and individuals. A
companion bill was introduced in the US House of Representatives by over 40
members led by Rep. Lloyd Doggett, (D-Tex.) and Rep. Rosa DeLauro, (D-Conn.).
“Offshore tax haven and tax shelter abuses are undermining the integrity
of our tax system and increasing the tax burden on middle income families,”
said Levin, chairman of the Senate Permanent Subcommittee on Investigations,
in one of his now familiar verbal barbs. “We cannot tolerate USD100bn in offshore
tax abuses burning a hole through our budget each year. We can fight back against
secrecy jurisdictions and shut down offshore tax abuses if we have the political
will. This bill provides a powerful set of new tools to clamp down on offshore
tax and tax shelter abuses.”
Levin introduced a similar bill in February 2007, supported by then Senator
Barack Obama, but with a slimmer Democrat majority in Congress, and with a Republican
administration, the political will to make the legislation succeed was not as strong. However,
over the past 12 months the deepening financial crisis and allegations of offshore
tax evasion by wealthy individuals around the world have once again brought
the issues of banking secrecy and 'unfair' tax competition to the fore. Coupled
with the fact that Obama, who has publicly pledged a fresh offshore crackdown,
is now in the White House, the legislation may have a better chance of succeeding
this time around.
The new Stop Tax Haven Abuse Act is a fortified version of the bill introduced
into Congress two years ago with the addition of three new provisions that would:
treat foreign corporations managed and controlled in the United States as domestic
corporations for income tax purposes; repeal tax laws that enable foreign entities
to avoid US taxes on stock dividends paid by US companies; and expand the tax
return reporting requirements for passive foreign investment corporations (PFICs)
to include US persons who don’t own a PFIC, but have formed, sent assets
to, received assets from, or benefited from a PFIC.
In other measures, the 84-page bill would:
allow US tax and securities law enforcement to treat for tax purposes non-publicly
traded offshore entities as being controlled by the US taxpayer who formed
them, sent them assets, received assets from them, or benefited from them,
unless the taxpayer proves otherwise;
authorize the Treasury Department to develop a list of 'offshore secrecy'
jurisdictions, starting from an initial 34 jurisdictions identified in IRS
court proceedings, and impose tougher reporting requirements on US taxpayers
with dealings in these listed jurisdictions;
give the Treasury Department authority to take "special measures"
against foreign jurisdictions and financial institutions that impede US tax
enforcement;
treat foreign corporations that are publicly traded or have gross assets
of USD50m or more and whose management and control occurs primarily in the
United States as US domestic corporations for income tax purposes.
require US financial institutions that open accounts for foreign entities
controlled by US clients, open accounts in offshore jurisdictions for US clients,
or establish entities in offshore jurisdictions for US clients, to report
such actions to the IRS;
tax distributions, gifts and loans from foreign trusts of real estate, artwork,
or jewellery to US persons, and treat US persons who receive offshore trust
assets as trust beneficiaries.
treat all US corporate dividend-based payments to non-US persons as taxable
income subject to withholding.
require hedge funds and company formation agents to comply with anti-money
laundering programs to ensure they screen their clients and any offshore funds;
strengthen penalties on tax shelter promoters by increasing the maximum
fine to 150% and increasing the maximum fine for failure to report offshore
stock holdings to USD1m per violation of US securities laws;
prohibit the US patent office from issuing patents for inventions designed
to minimize, avoid, or defer taxes.
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