Offshore tax havens used by rich Americans in Switzerland, the Cayman Islands and other nations are targeted for shutdown by bills offered on Monday by Democrats in both chambers of the Congress.
The Senate bill expands on one co-sponsored last year by then-Senator Barack Obama and Senator Carl Levin, who has sought a broad crackdown on tax dodgers estimated to deprive the U.S. government of more than $100 billion a year.
A thriving business in tax evasion developed in recent years on Wall Street among consulting firms, hedge funds and other elite financial players. Some purveyors even sought patent protection for their off-the-shelf schemes.
The Levin bill would ban patenting of tax avoidance plans, target dozens of offshore secrecy jurisdictions for attention, and put a greater burden on taxpayers to show that their tax arrangements are legitimate.
Offshore tax haven and tax shelter abuses are undermining the integrity of our tax system, said Levin, of Michigan, in a statement. We cannot tolerate $100 billion in offshore tax abuses burning a hole through our budget each year.
We can fight back against secrecy jurisdictions and shut down offshore tax abuses if we have the political will.
Three provisions have been added since last year to the Levin bill. One would classify U.S.-controlled foreign corporations as domestic for income tax purposes. Another would close an offshore tax dividend loophole that lets people dodge payment of U.S. taxes on U.S. stock dividends.
The third provision would expand tax reporting requirements for passive foreign investment corporations.
Similar legislation was introduced in the House by Texas Democrat Lloyd Doggett and more than 40 co-sponsors.
It is long past time to take effective action to stop offshore tax dodging, Doggett said in a statement. These outrageous tax havens add to the soaring budget deficit and shift the tax burden to small businesses and families, who play by the rules.
UBS HEARING AHEAD
The bills came two days ahead of a Senate hearing where a senior UBS AG executive is due to testify about a U.S. investigation alleging that well-to-do Americans used secret UBS accounts to avoid paying U.S. taxes.
The case puts Swiss banking secrecy on the line and was raised at a meeting on Monday in Washington between U.S. officials and Swiss Justice Minister Eveline Widmer-Schlumpf.
The minister told reporters she was assured by officials that the Obama administration is not intent on having an escalation but they are willing to work for a resolution.
Mark Branson, chief financial officer of UBS Global Wealth Management and Swiss Bank, is scheduled to be a witness at a hearing on Wednesday before the Senate Permanent Subcommittee on Investigations, which is chaired by Levin.
Branson appeared last July before the same panel at a hearing on the same topic.
At that time, Branson apologized and announced the bank would stop offering cross-border private banking through its unregulated units to U.S.-domiciled customers. He also said then that UBS was working with the U.S. government to identify U.S. clients who may have engaged in tax fraud.
UBS, the world's largest banker to the rich, agreed last month to pay a $780 million penalty and disclose the identity of some U.S. clients to avert criminal charges that Swiss regulators said would have put the bank's existence at risk.
But a day after the agreement, U.S. tax authorities said they were pursuing a civil lawsuit against UBS, fearing they might get details on as few as 12 accounts. The Internal Revenue Service wants data on 52,000 secret accounts held by Americans allegedly hiding about $14.8 billion in assets.
(Reporting by Kevin Drawbaugh and Corbett Daly; Editing by Lisa Von Ahn and Tim Dobbyn)