Senator Carl Levin: The $100 Billion Lineup: 04/01/08
Tax cheats come in all shapes and sizes, so it would be hard to pick out of a lineup the 100 Americans whom the IRS suspects of hiding funds in Liechtenstein, a tiny Alpine country known for opening bank accounts and accepting large deposits of funds with few questions asked.In contrast, identifying the guilty in a lineup of nations that facilitate international tax evasion is comparatively easy. Even before recent disclosures dramatized Liechtenstein as a roadblock to those of us fighting tax evasion, the nation had been identified by the Organization for Economic Cooperation and Development as an “uncooperative” tax haven that routinely declines to help other countries enforce their tax laws.
A tax haven is a jurisdiction with low taxes or no taxes and secrecy laws and practices that make it hard for other countries to discover if their taxpayers are concealing assets there. In effect, tax havens sell secrecy to attract tax cheats, peddling their services by evoking gentler terms like “financial privacy” and “wealth management.”
Liechtenstein’s LGT Bank, which is controlled by the royal family, is suspected of harboring assets for thousands of tax dodgers from around the world. A nation of just 35,000 citizens — a population so small it would not fill even a third of the football stadium at the University of Michigan — Liechtenstein boasts more than a dozen banks with client assets that top $145 billion.
It is far from the only country holding tax evading money. Over 50 tax havens operate in the world today, helping tax cheats offload their tax burden onto the backs of honest taxpayers who are left to make up the difference. The Tax Justice Network has estimated that over $11 trillion is stashed offshore by individuals alone. In the United States, offshore tax evasion robs the U.S. Treasury of an estimated $100 billion in unpaid taxes each year.
The Senate Permanent Subcommittee on Investigations, which I chair, specializes in exposing offshore tax abuses and is now digging into the Liechtenstein tax scandal. But we do not need a new tax scandal to know that it is past time for Congress to get serious about halting offshore tax abuse. Last year I introduced the bipartisan Stop Tax Haven Abuse Act to rein in tax havens like Liechtenstein from aiding and abetting U.S. citizens who are dodging their tax obligations and ripping off honest American taxpayers in the process.
This bill contains innovative and powerful measures that could strike an immediate and strong blow against these tax dodges. These provisions would recover billions that could help pay for health care, education, manufacturing support, aid for wounded warriors, and more.
How? The bill would create a presumption that anyone in the United States who forms, sends money to or receives money from an offshore entity exercises control over that entity and can be taxed on its assets. The presumption is rebuttable. Legitimate business dealings would, of course, be permitted, but tax cheats could no longer tie the IRS in knots trying to prove a taxpayer is hiding behind an offshore entity in a tax haven.
Another provision in the bill would empower the Treasury Department to order U.S. financial institutions to stop doing business with offending banks or jurisdictions, thereby helping to cutting off access to U.S. dollars.
If the United States were to enact legislation to curb tax haven abuses, it would not be acting alone. For the first time, we are seeing a worldwide rejection of offshore business as usual. Tax authorities in Germany, Australia, the United Kingdom, France, and other countries are lining up to work in concert to shut down tax havens that have, for too long, carried on an economic war against honest taxpayers. The United States ought to be batting cleanup in that lineup.
(Originally posted at the Huffington Post)