Data Leak Spurs Huge Offshore Tax Evasion Investigation 190
New submitter lxrocks writes "Tax authorities in the U.S., Britain, and Australia have announced they are working with a gigantic cache of leaked data that may be the beginnings of one of the largest tax investigations in history. The secret records are believed to include those obtained by the International Consortium of Investigative Journalists that lay bare the individuals behind covert companies and private trusts in the British Virgin Islands, the Cook Islands, Singapore and other offshore hideaways. The IRS said, 'There is nothing illegal about holding assets through offshore entities; however, such offshore arrangements are often used to avoid or evade tax liabilities on income represented by the principal or on the income generated by the underlying assets. In addition, advisors may be subject to civil penalties or criminal prosecution for promoting such arrangements as a means to avoid or evade tax liability or circumvent information reporting requirements.'"
Not new news (Score:5, Informative)
This has been public knowledge since the end of March, yet there has been almost zero coverage of it in the mainstream U.S. media. Here's a bit of info in map form from the CBC on April 3, 2013:
http://www.cbc.ca/news/interactives/icij-map/ [www.cbc.ca]
and an interactive feature, also from the CBC:
http://www.cbc.ca/news/interactives/offshore-tax-havens/ [www.cbc.ca]
Re:Not new news (Score:2, Informative)
WRONG! The Canada Revenue Agency has requested the information (Which the CBC has a copy of), and if I recall correctly, they announced [ottawacitizen.com] that they are investing $30 million to create a tax "Swat Team" to investigate offshore tax havens used by some 400 Canadians and recoup some $170 Billion in unpaid taxes held in those offshore accounts.
Re:Too big to jail (Score:5, Informative)
So, uh, which firm does your dad work for, exactly? I'm sure the IRS would love to know...
Tax avoidance and tax evasion are markedly different. Tax avoidance is straightforward: You plan decisions and investments so that all money is taxed honestly, but at the lowest rate for the return. For example, if you need to raise cash, you can choose to sell a stagnant stock at a loss, which will raise the cash you need and build a capital loss credit, rather than selling a stock that's moving up and will likely make even more money than it will cost in capital gains.
Tax evasion is where money is dishonestly hidden from being taxed, such as claiming the purchase of that new fishing rod is really a business expense for your car dealership, or moving it offshore to a country with lax enforcement and claiming to the IRS that you're paying taxes there, while telling the foreign government that it's being taxed here. It's pretty easy to tell when you're "dabbling" in tax evasion, because somewhere in the paper trail, somebody lies.
Effectively avoiding taxes does require having enough money to be able to maneuver around so that the minimum taxes are paid. The taxpayer must have enough money available that they can move their profits into inaccessible places (foreign companies, unrealized investments, etc.) while still having cash to live on. Then when the time is right they can move that money back into something easier to work with, paying a lower tax rate and profiting from the time spent.
Source: I work at a financial advising firm. We do some tax avoidance, but no tax evasion.
Re:32.3 trillion (Score:5, Informative)
If they don't want to be part of society, they should leave. Go live in somalia. There are no taxes there.
If you want police, fire, sewers, working traffic lights, hospitals, a military, air traffic controllers, etc. etc. etc. then you will need to pay taxes.
The richest pay most tax (Score:4, Informative)
The brunt of the tax burden is borne by the middle class.
The "middle class" tend to pay the highest proportion of their income in taxes, but the wealthiest in society pay the largest chunk of the total personal tax bill.
In the UK, for example, the top 1% pay 24% of all Income Tax and the top 10% pay over 50%. The next 40%, which could reasonably be classified as the "middle class", pay 35% which leaves less than 12% being paid by the other half of society.
So in both absolute terms and per-capita terms, the richest 10% pay the most tax.
The top earners are also the most mobile and "international" members of society, so the unfortunate conclusion is that countries have to retain those top earners, and one way they do that is to give them a fabvourable tax position. While they pay lip-service to stopping evasion, most countries would prefer to have the richest paying some tax rather than losing them and getting no tax at all.