Irs_Ends_Amnesty_for_Use_of_Overseas_Tax_Havens

IRS Ends Amnesty For Use Of Overseas Tax Havens Question 1: What is a tax haven' Why is the use of tax havens attractive to individuals and corporations' Why has the IRS chosen to crackdown on the use of tax haven accounts' Tax havens are particular countries or territories where individuals and/or corporations are not taxed or low taxed on their money. Examples can be Switzerland, Luxembourg, the United Arab Emirates or the Cayman Islands. American citizens or corporations tend to evade the U.S. tax system in order to avoid paying the taxes on their income or on amounts of money they have; for the account to be considered an illegal undeclared one, it should be equal or grater than $10K. According to the IRS, tax evaders are mostly individuals who inherited money, survived from the Holocaust or simply are businessmen and women that decide to hide their money to avoid U.S. taxation. Because of this system, the U.S. government is lacking tax revenues as much as $100.000.000 billion each year; the IRS is aware of the huge amount of money lying in secret offshore accounts and decided to chase the evaders with a stronger emphasis. Therefore, the IRS is encouraging tax evaders to come forward through an amnesty program with which they can declare any untaxed illegal account and avoid criminal prosecution in exchange for some conditions, such as paying back taxes; the effort is directed towards recovering part of the government lacking revenue and ensure that those individuals that make a voluntary disclosure in regards to their offshore accounts will actually be paying taxes on their money in the future, and it is considered to be a great opportunity for other offshore accounts owners to come clean without having to face more serious legal and financial consequences once discovered after the deadline of the amnesty program. Question 2: What does the recent action of the IRS mean to companies like USB that build their reputation on client confidentiality and offering services like accounts that shelter income from taxes' The action undertaken by UBS has a political background that has been triggered by the bank’s previous admission of having participated to a scheme aimed to defraud the U.S.; to contain the consequences, the Swiss and American governments reached the decision of forcing UBS to disclose the names of a great amount of UBS accounts holders. Therefore, even though for a Swiss bank such as UBS disclosing information about their customers is a huge breach of the confidentiality the clients expect from a service such as the one they provide, the bank did not have a choice regarding whether to protect or not the privacy of its customers. This action will surely reflect on UBS’s reputation and other individuals that still wish to retain offshore accounts will see the bank with a bad eye and possibly refrain from relying on their service in the future. UBS’s fault was to initially participating to the scheme, rather than directly exposing the clients, as this last operation was simply the consequence of previous actions; other banks are not being asked to reveal information about their accounts, therefore worsening USB’s position. IRS implications with UBS are a direct consequence of the aforementioned past events, and they will obviously target UBS clients immediately given the opportunity; IRS makes clearly understand that even if all owners of offshore accounts are targeted, the ones connected to UBS are currently in the most sensitive position, and this cannot help but bringing the reputation of the Swiss bank down. Question 3: President Obama claims that the current tax system is heavily influenced by lobbyists and special interest groups. What might be the reaction of these groups to the recent actions by the IRS' How might their reaction change if the crackdown is extended to corporations' The U.S. government, just as the one of the majority of other well developed Western countries, has always had to face the ghost of corruption and inside manipulation. These kind of processes are always undergoing and, whether politicians like to admit it or not, there is awareness of their happening. Since some of the resolutions taken end up benefitting none other than the politicians themselves, governments tend to turn a blind eye upon them, knowing that trying to change the state of facts would cause an excessive misplacement of power from the people that currently are able to manipulate the system (as, for example, lobbyists) that, at the end of the day, always retain an undeniable influence inside the political circle. Obama mentions lobbyists as one of the responsible parties for the current tax evasion condition, but he forgets to mention that those figures have always been, and will always be, secretly connected to the U.S. political power and are probably too rooted in the situation for being threatened by the IRS. It is certainly not the first time action is undertaken in order to limit the tax haven situation, however, the strongest lobbies seem to be rarely affected by it, with some rare exceptions that seem to be the exception that confirms the rule. Even if the crackdown is extended to corporation, the ones that are more deeply involved with political powers will most likely be protected; I personally believe it would be hypocritical and slightly naïve to believe that if the IRS extends its action to corporation, all of them will be treated equally in regard to tax evasion. Although president Obama does have a point in blaming the lobbyists, he surely is aware of the fact that the situation is too intricate to be managed by just pointing fingers, and that if he really wants change to happen on this level, he is going to have to unravel the situation from the bottom, inside of its own government. Question 4: Consider the information exchange that is currently going on between the United States and other countries. How might this type of information exchange change the nature of doing business on a global scale' The flow of information being uncovered while dealing with the tax haven situation can certainly be considered as a threat for most businesses that do not carry on all of their operations in the clear, may it be regarding to taxation or to other financial aspects of their business. If before now the only eye they had to hide from was the one of their own country, the collaboration between countries to prevent illegal action is creating a global, overall net of control that will perhaps in the long run be able to identify most of the inefficiencies that now benefit illegal commerce. More disclosure automatically means less confidentiality, and even when taking this discussion on a legal, fair business level, many companies will not enjoy the details of their business being out in the sun for everybody – which includes competitors – to see. It is possible that as the control gets tighter, some companies will be more careful in undertaking new sensitive opportunities, if only to preserve the identity and confidentiality of their business, and this might perhaps lead to a slowdown in global interactions. The consequences of the developing collaboration between governments can only be seen with time, and deeply depend on the extent of disclosure of information that they will decide to go to.