In the wake of the release of the Panama Papers, the U.S Congress continues to issue warnings to tax cheaters.The congress has passed legislation to reward whistleblowers who disclose tax-haven holdings by U.S. Citizens. An IRS amnesty program also been offered to citizens who have not reported assets held offshore, and more than 50,000 American companies and citizens have volunteered to avoid prosecution.
Stephen M. Kohn, one of the lawyers for original whistle-blower Bradley Birkenfeld says that illegal asset hiding is now very serious business. He claims he now represents several whistle blowers with information on 35000 U.S entities who hold assets in 15 banks in Hong Kong and Europe.
Birkenfeld, a former private banker at Swiss bank UBS was the initial whistle-blower in the expansive UBS tax-fraud scheme. He received a 40-month sentence, after pleading guilty to assisting some wealthy U.S citizens evade taxes. His accusations also led to over 14,000 UBS clients admitting to tax-evasion. Ironically, after his prison release, he also received a mind-blowing $104 million award, which was claimed as participant of the whistle-blower program.
In light of transformation to the digital storage of information, there is literally no where to hide, as information is now much more accessible, and there are more tools at the disposal of the authorities. More leaks such as those involving the Panama Papers are likely. Whistle-blowers are entitled to receive between 15 and 30 percent of the total amount of the fraud, and the IRS says hundreds of millions of dollars have been recovered, with tens of thousands of cases still pending.
U.S officials have revealed that there has been involvement in global meetings discussing the massive trove of leaked data in what is termed the Panama Papers, and how it can be used to catch criminals. The project was organized as the Joint International Tax Shelter Information and Collaboration network or JITSIC, and officials are urging Americans to present themselves for amnesty, before illegal activity is discovered. Discussions held in Washington and Paris, are evidence of involvement in attempts to analyze information on more than 214,000 offshore companies created by the Panamanian law firm Mossack Fonseca that was associated with the leaked Panama Papers. .
The Foreign Account Tax Compliance Act, or FATCA, is another weapon that the U.S. Government created in 2010 to fight tax evasion. It requires all (foreign) financial institutions (FFI’s) to search their records and to report the assets and identities of U.S. persons to the U.S. Treasury Department every year. Industry practitioners and the IRS say Americans are still hiding vast sums of money in tax havens, and are becoming increasingly more sophisticated. Other indications are that the U.S itself may be the world’s biggest tax haven, and Americans do not need the services of firms such as Mossack Fonseca to hide assets offshore as it can be easily done in places such as Wyoming and Nevada. In these states, it is a relatively easy proposition to create corporate entities, that it becomes virtually impossible to decipher accurate ownership.
However, some media reports indicate that potentially damaging information on thousands of American companies and citizens with indirect connections to offshore accounts are contained in the leaked Panama Papers. The Treasury Department also estimates that $300 billion dollars is generated illegally annually, and much is hidden both in the U.S and abroad.
The IRS Offshore Voluntary Disclosure Program was introduced in 2012 and allows taxpayers who hold undisclosed assets, to make a voluntary disclosures, and avoid substantial civil penalties, and also eliminate the risk of criminal prosecution for all tax issues and failure to file Foreign Bank and Financial Records.