| Offshore Tax Evasion |
A stockbroker once explained to a group that the difference between tax avoidance and tax evasion is five years in jail.
A more precise description is provided in U.S. tax code section 7201, which states,
Any person who willfully attempts in any manner to evade or defeat
any tax imposed by this title or the payment thereof shall, in
addition to other penalties provided by law, be guilty of a felony
and, upon conviction thereof, shall be fined not more than $100,000
($500,000 in the case of a corporation), or imprisoned not more than
5 years, or both, together with the costs of prosecution.
Foreign persons often find it difficult to understand the concern of U.S. taxpayers and tax professionals regarding tax evasion because the U.S. is reputed to be one of the few major countries in the world where tax evasion is a criminal felony. In many or most other countries it is a misdemeanor and tax evasion is commonplace. However, many countries have a value added tax in addition to their sales tax and the VAT is harder to avoid than the income tax.
One of the ways affluent taxpayers protect themselves from charges of tax evasion is by securing written opinions from qualified tax professionals before embarking on a transaction that may be unclear or borderline. If they actually do rely on the advice of the tax professional, they can almost always avoid felony charges of criminal tax evasion. However, they are still subject to an assortment of fines, interest and the tax that is claimed to to be due unless they are willing to dispute the IRS claims in a court of law.
The IRS claims that there is widespread tax evasion by U.S. persons with offshore financial accounts, foreign corporations, offshore trusts and offshore credit cards. Early in 2003, they embarked on a major project to track down and audit those taxpayers. They offered taxpayers a limited amnesty from prosecution if they would come forward voluntarily by April 15, 2003 and would disclose the identity of amy promoters who sold them some kind of offshore financial arrangement. They also subpoenaed the records of major credit card companies that issued credit cards drawn on foreign banks. As of early March, 2004 they claim the program has generated $170 million in taxes, interest and penalties from about 250 taxpayers but they claim that there are over 750 additional cases that have not yet been settled.
Further details are available through the links that follow.
See the IRS article explaining the "Dirty Dozen" most eggregious tax evasion schemes.
See IRS Amnesty Program
See Offshore Tax Evasion is Widespread by David Kay Johnston
Taxpayers who have failed to report income from foreign sources should contact a tax defense lawyer before they discuss their problem with an accountant or other financial advisors.
Vernon Jacobs
(C) 2004, All rights reserved.
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