The US Internal Revenue Service (IRS) announced Thursday that it, the Australian Tax Office, and HM Revenue and Customs (the UK tax authority) have obtained information about a large number of trusts and companies holding assets on behalf of residents throughout the world and plan to share that information with other countries’ tax authorities (IR-2013-48).
This information reveals the extensive use of these entities, which are organised in a number of jurisdictions, including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands, and can be used to avoid tax liabilities.
The three taxing authorities have obtained both the identities of the individual owners of these entities and the advisers who helped establish the entities, and they are prepared to share the information with tax administrations of countries that request it. “Increasingly, tax administrations are working together in this way to assist one another in identifying non-compliance with the tax laws,” the IRS said.
Steven Miller, acting IRS commissioner, said in the IRS announcement, “Our co-operative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes.”
In its announcement, the IRS explained that while there is nothing illegal about holding assets through offshore entities, people often use them to evade taxes, which is illegal. It also reiterated that advisers who promote offshore arrangements as a way to avoid tax or reporting requirements may be subject to civil or criminal penalties.
The announcement also advised US taxpayers who may hold assets through these offshore entities to review their tax obligations for these holdings, seek professional advice, and participate in the IRS offshore voluntary disclosure programme if necessary. This US amnesty programme permits taxpayers with offshore holdings to disclose them and pay reduced penalties.
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—Sally P. Schreiber (email@example.com) is a CGMA Magazine senior editor.