Here in the United States, offshore accounts have received a lot of attention thanks to Republican presidential candidate Mitt Romney’s decision to put some of his vast wealth into foreign institutions.
Romney is far from alone in stashing money in Swiss bank accounts and shelters in Bermuda and the Cayman Islands. And let me make an important point here. Romney has reported these holdings to Uncle Sam, so there’s nothing illegal in his choice of non-U.S. financial institutions.
But such transactions still raise eyebrows, not only of political foes but of we Average Janes and Joes who are simply looking for a CD that pays more than a paltry 0.4 percent return.
That’s why we take notice when we get word from the Tax Justice Network, or TJN, that worldwide, the super-rich had at least $21 trillion hidden in secret tax havens worldwide at the end of 2010.
The TJN was by created by the British Houses of Parliament to research, analyze and report on how taxation and various types of tax evasion affect economies. It touts its latest report, The Price of Offshore Revisited, as the “most detailed and rigorous study ever made of financial assets held in offshore financial centres and secrecy structures.”
And the group says the $21 trillion figure, which is equal to the size of the United States and Japanese economies combined, is conservative. It represents financial wealth only and excludes a welter of real estate, yachts and other nonfinancial assets owned via offshore structures.
When those other noncash assets are added, TJN suspects there may be as much as $32 trillion in hidden worldwide financial assets held offshore by high net worth individuals.
IRS offers amnesties for offshore accounts
Locally, the Internal Revenue Service is continuing its efforts to get foreign account holders to reveal their offshore assets and pay U.S. taxes on the money.
Two previous amnesties (what the IRS prefers to call offshore voluntary disclosure programs, or OVDPs), along with results so far this year in a third such program, have brought in more than $5 billion in back taxes, interest and penalties. That money was collected from 33,000 taxpayers who confessed their holdings in order to avoid criminal charges of tax evasion.
The 2012 offshore disclosure effort is underway indefinitely. The penalty for finally reporting previously hidden offshore assets has ticked up a bit to 27.5 percent from the 25 percent in the 2011 program. But it’s better than the alternative if the IRS discovers your offshore money after it ends the amnesty period.
In that case, you’ll face full penalties and possibly the inside of a federal jail cell.
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