Tax News

CCH (cch.taxgroup.com) reports:

  Senate Finance Committee Chairman Max Baucus, D-Mont., on July 24 pushed a panel of witnesses on the findings of a Government Accountability Office (GAO) investigation of the Ugland House, a tax haven in the Cayman Islands. Baucus said the problem might require financial firms to file information reports to the IRS when they facilitate transfers of client funds offshore as a method of enabling the IRS to better track tax evaders by matching that report with filed returns. "I think requiring individuals and companies to be more forthcoming about their offshore holdings in places like the Caymans will go a long way, "said Baucus.

  The Finance Committee also sought input on six legislative recommendations, including modifying the rules for the Foreign Bank Account Report (FBAR), which facilitates information collection by the IRS. The proposals would reinforce the role of the IRS in levying penalties against individuals who fail to file an FBAR, increase the statute of limitations for FBAR violations, require that FBARs be filed with tax returns and strengthen rules on the disclosure of the identity of individuals who make money from offshore financial transactions. Witnesses agreed that the proposals would make strides in beginning to solve the problem of offshore tax evasion.

  Other recommendations from the witnesses included revising current IRS Form W-8 procedures, which allow US taxpayers to hide behind foreign shell corporations to protect individual identities, to require foreign companies to prove they are an active trade or business.

  By Jeff Carlson, CCH News Staff

SFC Release: Hearing Statement of Senator Max Baucus (D-Mont.) Regarding The Cayman Islands and Offshore Tax Issues

SFC Release: Baucus Tackles Tax Evasion In Hearing On Cayman Islands' Ugland House

JCT Selected Issues Relating to Tax Compliance with Respect to Offshore Accounts and Entities, JCX-65-08

GAO Report: Cayman Islands --Business and Tax Advantages Attract U.S. Persons and Enforcement Challenges Exist (GAO-08-778)

GAO E-Supplement: Cayman Islands --Review of Cayman Islands and U.S. Laws Applicable to U.S. Persons' Financial Activity in the Cayman Islands, (GAO-08-1028SP)

GAO Testimony: Cayman Islands --Business Advantages and Tax Minimization Attract U.S. Persons and Enforcement Challenges Exist (08-779T)