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Score One For Tax Justice! New IRS Rule Makes Off-Shore Tax Evasion A Little Bit Harder

April 20, 2012

The surprisingly controversial idea that all of us should actually pay our taxes got a bit of a boost Tuesday, with the release by the Treasury Department of the final rule requiring banks to report to the IRS any interest payments made to foreign account holders in the same way they must report interest payments made to U.S. resident account holders.

This is good for two reasons: 1) this will help identify American citizens posing as foreign account holders (who do not pay U.S. taxes); and 2) when we help other countries identify their tax evaders, they’re more likely to help us find ours.

As you can probably imagine, this does not sit well with the Republican Party. Why? Well, because they are fundamentally opposed to paying taxes, that’s why!

Of course, they can’t actually say that out loud. So when the issue came up before the House Financial Services Committee hearing in October…

Republican Chairman Spencer Bachus read a letter from the Florida House delegation, which apparently is protective of its banks even when they facilitate tax evasion. Many people who live in unstable countries and have U.S. bank accounts, the letter argues, are “concerned their personal bank account information could be leaked to unauthorized persons in their home country government or to criminal or terrorist groups upon receipt from U.S. authorities, which could result in kidnapping or other terrorist actions… (Tax Justice Institute)

Almost have you convinced? Don’t be fooled. The IRS would only hand over information to foreign governments in response to a careful, limited request under the auspices of a formal tax information exchange agreement. Besides, the current rule actually helps criminals, corrupt government officials, terrorists and money launderers by allowing them to hide their money in the U.S.

The hearings made it painfully clear that what Citizens For Tax Justice likes to call the “tax cheaters’ lobby” ( the politicians and bankers who benefit from facilitating tax evasion) were out in far greater force than those supporting the proposed rule. Still, in the end, it is refreshing to see the IRS take a stand for sound policy and enforcement. Score one for the good guys.


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