Daily Tax Update - July 17, 2008

SENATE SUBCOMMITTEE HOLDS HEARING ON FOREIGN BANKS’ TAX EVASION ACTIVITIES:  Today, the Senate Permanent Subcommittee on Investigations held a hearing entitled, “Tax Haven Banks and US Tax Compliance.” The hearing examined how financial institutions located in offshore tax havens, including Liechtenstein and Switzerland, may be engaged in banking practices that could facilitate, and in some instances have resulted in, tax evasion and other misconduct by US clients. The hearing also examined how US domestic and international tax enforcement efforts could be strengthened. 

  • According to the Subcommittee, “A six month-long bipartisan Subcommittee investigation examined LGT Bank in Liechtenstein and UBS in Switzerland to expose how tax haven banks are assisting US taxpayers to evade taxes, in particular by urging US clients to open accounts in their offshore jurisdictions, assisting them in structuring those accounts to avoid disclosure to US authorities, and providing financial services in ways that do not alert US authorities to the existence of the foreign accounts.”
  • Subcommittee Chairman Carl Levin said, “Tax havens are engaged in economic warfare against the United States, and the honest, hardworking American taxpayer is losing. The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States. Congress needs to enact strong penalties on tax haven banks that help US taxpayers avoid paying taxes to Uncle Sam.”
  • Ranking Subcommittee member Sen. Norm Coleman said, “It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars from taxation, forcing working families to shoulder the tax burden. By exploiting gaping loopholes, these foreign banks are enabling felony tax evasion. Simply put, foreign banks should not be Al Capone safe-houses for evading taxes. Closing these loopholes means we must strengthen reporting requirements, broaden the scope of the audit program, and extend the amount of time the IRS has to investigate cases involving an offshore tax haven.”
  • In conjunction with the hearing, the Subcommittee released a report entitled, “Tax Haven Banks & US Tax Compliance.” The report can be accessed via: http://hsgac.senate.gov/public/_files/071708PSIReport.pdf
  • Witness testimony can be accessed via: http://hsgac.senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=3b2c1960-1147-4025-91a0-ed2cb728c962

TAX BILL INTRODUCED JULY 16TH:
H.R.6507: To amend the Internal Revenue Code of 1986 to modify the partial exclusion for gain from certain small business stocks.
Sponsor: Rep Childers, Travis [MS-1] (introduced 7/16/2008)      Cosponsors (None)

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
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