Posts Tagged ‘banking secrecy’

US taxman breaks Willie Sutton rule

April 9, 2011

When asked why he robbed banks, legendary holdup man Willie Sutton replied, “Because that’s where the money is.” America’s Internal Revenue Service is breaking that rule to target US citizens living overseas. The IRS is mandating billions in government and private sector resources to gather unprecedented levels of financial information to conduct what’s probably a wild goose chase for overseas tax cheats born of bureaucratic sophistry.

The drive to more closely monitor the estimated 5.3 million American citizens living abroad grew out of a crackdown on tax cheats inside the US. Swiss banking giant UBS – where former Texas Senator Phil Gramm serves as vice chairman – actively recruited citizens within the 50 states to participate in tax evasion schemes using overseas bank accounts. That led to increased scrutiny of overseas bank accounts, and since nearly all Americans living overseas have foreign bank accounts, they’ve become primary targets.

As I wrote for Asia Times, the new regime includes a vast expansion of heretofore largely unenforced rules on reporting of overseas bank accounts that will extend to investments and even credit card transactions, creating mountains of data for the already overburdened IRS and huge new headaches for overseas banks, brokers and US citizens.

Many in the financial services industry are balking, and many Americans see the new rules as invasions of privacy. China-based US accountant Laurence Lipsher, author of Larry’s 2011 Tax Guide for US Expats and Green Card Holders in User Friendly English, fears the IRS request for comments on the new rules could be like Chairman Mao’s “Let 100 Bloom” campaign that was used to identify dissidents.

The thirst for government revenue in the face of mounting budget deficits helps fuel the focus on expatriates, since more Willie Suttonic ideas such as closing corporate loopholes or raising taxes on top earners are off the table. While some Americans overseas claim that second home in Monte Carlo as tax residence or live lavishly in company-paid villas with servants and limos, most are just working stiffs, often getting by on incomes laughable by US standards.

In one instance documented by American Citizens Abroad, an expatriate that accepted the IRS “voluntary disclosure” invitation to correct previous oversights found tax liabilities of less than $200 accompanied by penalties of $60,000 on their $300,000 life savings.

What would Willie say?

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, financial crisis, and cheap lingerie.


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