Next Target for Action on Cross-Border Tax Evasion: The United States?

  • November 13, 2019

Like most countries, the U.S. has been relentless in pressuring countries where it suspects that its citizens have stashed money to evade taxes.

For years, most OECD member nations have been tracking similar types of offshore tax avoidance activities that mostly lead to harmful tax competition. Now the tables may be turning.

The History of "Hidden" Offshore Tax Evasion

Remember when the Foreign Account Tax Compliance Act (FATCA) became law back in 2010? (It seemed inevitable that pundits would seize on that acronym and label it the “fat cat law,” by the way.) FATCA was just one of several measures taken by the U.S. in the past decade or so targeting individuals using “hidden” offshore assets to evade taxes. In 2009, U.S. legal action against the government of Switzerland and Swiss bank UBS AG resulted in a settlement in which the bank agreed to turn over identifications for thousands of accounts tied to U.S. citizens. In 2013, a major Liechtenstein bank forked over $23.8 million to the U.S. to resolve a criminal tax evasion investigation.

Vertex Inc.

Finland Looking at U.S. Accounts

But now at least one country is going after “fat cats” of its own with accounts in the U.S., according to an Economist article, “Land of the tax-free: Will America go from hunter to hunted in cross-border tax evasion?” Using the same legal mechanism that the U.S. leveraged against UBS, Finland asked the IRS to petition a federal court to serve summonses on three American banks – and the court approved. The Finnish authorities were tipped off by heavy use of cards issued by the American banks at ATMs in Finland. However, Finland has had additional technical assistance. The country adheres and participates in the multilateral Common Reporting Standard Convention on the Automatic Exchange of Information, a collaborative arsenal of financial information shared between countries. Coupled with aggressive fact-finding on corruption and tax evasion, investigation and potential prosecutions are certain to increase in the years to come.

Consequently, Finland’s move could be the start of an alarming (and encouraging) trend, the article notes. “Other countries suffering tax leakage will be looking more closely at this procedure. Experts say it could help to break open not only dodgy bank accounts but also trusts and insurance policies, which are also commonly used to hide capital.”

The legal dynamics of cross-border disclosure are complex, and the article does a good job of describing the various layers of multilateral cooperation and unilateral policy. For me– as I think about the rise of unilateral tax regimes affecting companies often portrayed as the fat cats of the global digital economy – it’s a reminder that reciprocity sometimes takes unexpected and unforeseeable forms.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.


About this Contributor

George L. Salis Headshot
George L. Salis
Principal Economist and Tax Policy Advisor

George L. Salis is Principle Economist and Tax Policy Advisor and is also an economist, lawyer and tax professional with 25+ years of experience in international taxation and trade compliance, tax planning and controversy, fiscal regulation and tax economics consulting. George holds a BSc in economics and political science, an LLB, an M.A. in legal and ethical studies and an LLM in international tax law. A certified business economist, he also holds a PhD in international law and economic policy, an Advanced Certificate in EU Law from the Academy of European Law, European University Institute in Florence and an Executive Certificate in Economic Development from the Harvard Kennedy School of Government.

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