According to an in-depth report by Reuters, the US are planning an intensive crack down on offshore tax havens preferred by their elite and wealthy citizens.
The report focuses on Senator Carl Levin’s drive to stop taxation being avoided offshore by some of America’s most successful and affluent individuals. The Senator is proposing legislation and law changes to prevent offshore schemes being promoted in America, and he is also pushing for penalties to be placed on legal offshore centres in the same way as illegal offshore money laundering locations are penalised. So, offshore tax havens are to be targeted – but what does this mean for the average American tax payer?
Well, the average American tax payer is probably not making use of the targeted tax avoidance schemes such as those that allow wealthy investors to buy into offshore hedge funds which are doing derivatives deals with investment banks that allow the funds to avoid paying taxes on American stock dividends. However, a sufficient number of the US’s most wealthy individuals are, because the report from Reuters estimates that about 100 billion dollars are lost each year in taxation revenue from US coffers as a result of such offshore schemes.
Senator Carl Levin has the likes of Democrat Barack Obama and Republican Norm Coleman on his side – proving that all leading parties are pretty much united in their drive for unfair taxation avoidance schemes to be prevented. The three senators have already introduced a bill that proposes banning the patenting of certain tax evasion strategies as dreamed up by leading US financial institutions. Furthermore, the bill proposes targeting thirty-four specific offshore tax havens such as the Cayman Islands, Bermuda, Grenada and the Bahamas too.
The bill and the senators’ policies are pretty harsh – they want offshore tax havens used by America’s most wealthy to come under the same scrutiny and face the same penalties as centres identified as money laundering locations. And yet, offshore centres offering companies and individuals the ability to create taxation avoidance schemes are simply offering a more advantageous business and investment climate than the US. Aiding and abetting money laundering and offering a low tax environment are hardly in the same ball park let alone similarly punishable offences.
The US needs to ensure it doesn’t over react and isolate itself internationally in terms of its popularity any more or push its more affluent and successful citizens overseas and lose out on all their taxation revenue…