Tax Haven Abuses

Date: Aug 10, 2006

I am in receipt of a 400-page report from the United States Senate Permanent Subcommittee on Investigations Committee on Homeland Security and Governmental Affairs entitled "Tax Haven Abuses: The Enablers, The Tools And Security." This strong indictment of offshore tax cheaters is worthwhile reading, and we will be pleased to send a copy to any readers who request one. It is a well-researched and thoughtful outline of the most common techniques used to cheat Uncle Sam out of tax revenue. In future newsletters, I intend to focus on a few of the most glaring scams outlined in the Senate Report, as they are good examples of what not to do.

I was interviewed for this report and spent several hours with an attorney for the Subcommittee and several other staff members. Their focus was on people and companies abusing our system and how to stop them. Unfortunately, we had a lot to talk about, as there are many abusers out there.

What most Americans do not realize is that tax fraud is the basic marketing premise of most offshore providers. I have focused on this time and time again in past newsletters, and five years ago I did a survey of the top 1,000 sites marketing Asset Protection. I found that more than 90% of these sites advocated something crooked, such as secret unreported accounts as the basis for their advertised protection. It is time to redo this survey in this post 9-11 Patriot Act dominated banking world. It is my suspicion that there are fewer crooks, but that at least 80% of the sites are still advocating some sort of tax fraud, money laundering or some other illegal activity. When I redo the survey, I will report the results to our readers.

It is important to realize that THE RULES HAVE NOT CHANGED. U.S. Citizens and Residents are still taxed on their worldwide income from ANY and ALL sources derived. All offshore accounts must be reported. Like it or not, we still have to pay our taxes.

What has changed is that the U.S. Government now is actually in possession of computer data on all offshore accounts whether reported or not. Watch out when good old Uncle Sam actually starts comparing data received from all the banks reporting, pursuant to the Patriot Act with tax returns. In addition, if this report generates significant political momentum, I expect to see significantly greater funding to enforce the existing rules and to crack down on countries that are perceived as impeding the abilities of the USA to crack down on tax cheaters and collect taxes. I will be keeping my readers up to date on what is happening in Washington.

It is just as important to understand what this Senate report is NOT. Simply stated, it is not an indictment of all things international. International is still good. There is nothing wrong with legitimate offshore planning. Comply with the laws, fully disclose, and you will be just fine. There are a small number of what I call "The Sky is Falling Tax Planners" who see this report as foretelling the end of offshore tax structuring, particularly involving countries thought of as Tax Havens. This is not going to happen. We will continue to engage in international commerce in this ever-flattening world. When we focus in on Tax Havens, what we don't always realize is that the U.S. is one of the most attractive Tax Havens in the world. Compared with most other industrialized countries, our rates are low and predictable.

So, what's going to happen? I look for the folks in Washington to have a short-term focus on tightening up on tax cheaters. We will probably see more aggressive enforcement of the existing (and very adequate laws). The promoters who stretch these laws beyond reason may be spending some time with Bubba along with their clients. Who knows, we may also get some additional laws. One thing I do know for sure: We will continue to buy our jeans from China.

ABOUT THIS EDITOR:

Rob Lambert, Founder and former law professor is considered to be foremost expert on tax compliant asset protection structures. A contributing editor to Lexus Nexus debtor creditors series of law books Rob's passion is implement client wealth plans that stand the test of time and hold up under duress.

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