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Tightening offshore tax rules

By Kay Bell · Bankrate.com
Thursday, July 14, 2011
Posted: 2 pm ET

Attention lawmakers looking for ways to bring down the country's budget deficit.

Sen. Carl Levin, D-Mich., says he knows an easy way to get $100 billion into the U.S. Treasury each year: close offshore tax loopholes and strengthen offshore tax enforcement.

Levin has introduced a bill that contains a variety of measure to end what he calls "offshore trickery" and what the Internal Revenue Service defines as abusive tax havens. This session of Congress is the fifth one in which the Michigan senator sponsored such legislation.

Entitled the Stop Tax Haven Abuse Act, this latest Levin bill is a product of the investigative work of the Permanent Subcommittee on Investigations, which Levin chairs. Over the years, the subcommittee has examined offshore tax abuses, including the use of offshore corporations and trusts to hide assets, the use of tax haven banks to set up secret accounts and the involvement of U.S. bankers, lawyers, accountants and other professionals to devise and conduct abusive tax shelters.

Levin's bill would give the Treasury Department more investigative powers and authority to take steps against foreign jurisdictions or financial institutions that impede U.S. tax enforcement. That should help the IRS more easily track down assets hidden overseas, says Levin.

The bill also would make it harder for hedge funds and U.S. corporations to avoid federal taxes by opening shell companies overseas.

And in light of the continuing deficit and debt ceiling debate, Levin believes his loophole-closing bill would be a valuable resource as Capitol Hill looks for ways to increase revenue without increasing taxes.

Plus, the tax-avoiding targets are popular political bogeymen.

"Offshore tax abuses are not only undermining public confidence in our tax system, but increasing the tax burden on (the American middle class)," said Levin in announcing his bill. "People are sick and tired of tax dodgers using offshore trickery and abusive tax shelters to avoid paying their fair share."

Even if the bill isn't included as part of any deficit reduction package this year, Levin says it's still worthy of enactment on its own.

Rep. Lloyd Doggett, D-Texas, a member of the House Ways and Means and Budget Committees, agrees. Doggett says he will introduce a companion bill in the House.

Republicans, however, have so far reacted coolly to the proposal, at least in connection with the debt limit debate. Rep. Eric Cantor, the Virginia Republican who was last seen going toe-to-toe during a late-night debt ceiling meeting with President Barack Obama, apparently is sticking to his position that loopholes should be addressed in some future debate on tax reform.

Meanwhile, if you're looking for a personal domestic tax haven that won't raise any IRS eyebrows, my story on picking the perfect retirement tax haven has some things you should consider.

And don't miss out on any tax news and tips. Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter at @taxtweet.

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3 Comments
Jake
July 16, 2011 at 11:13 pm

If they really want to bring down the deficit they should propose to end the "wars" we're currently in.

But alas what they really mean is they want more money to fund these wars and thus line their pockets...

Pierre
July 14, 2011 at 11:40 pm

The public should be told about Bills such as these and irregardless the outcome the public should be aware of how their congressperson voted

It seems the politicians voting these bill down probably receive goodly donations for their votes

a pox on both parties who now control the country