US Tax Authorities Are Hunting Expats
Yasmine Yahya - Straits Times Indonesia | February 18, 2011
Singapore. United States citizens living in Singapore who may have been hiding assets or avoiding taxes back home should not be too surprised to get a knock on the door from a special agent.
The US Internal Revenue Service (IRS) has armed itself with hundreds of new agents and a list of likely suspects. And it has targeted Singapore as one of the cities around the world where there are rich Americans.
Late last year, the IRS said it would hire 800 employees worldwide, with a focus on Hong Kong and Singapore.
The move came after it successfully carried out an offshore voluntary disclosure initiative in 2009.
Under that scheme, US taxpayers with undisclosed income from hidden offshore accounts could give themselves up to the IRS and pay their back-taxes and interest for up to six years, plus a penalty.
In exchange, the IRS granted them amnesty from criminal prosecution.
About 15,000 US taxpayers from around the world came forward.
"Part of what happened under the program was that the IRS required these 15,000 people to submit to an interview," said Kurt Rademacher, director of international tax practice at US law firm Butler Snow.
These taxpayers were asked questions such as who helped them to set up their offshore accounts, who their bankers, lawyers and accountants were, and where their accounts were located.
"The IRS was building a group of targets - 'interesting people whom we need to discuss things with' - and now they are out talking to these people," Rademacher said.
"If you get a knock on your door and the person there says he's a special agent, I suggest you seek counsel immediately."
Most of those 15,000 taxpayers who decided to come clean were based in the US and Europe.
Baker & McKenzie represented more than 1,000 of them, and its Hong Kong-based head of global tax practice, Mr Richard Weisman, said less than 5 per cent were based in Asia.
The IRS has now launched its second offshore voluntary disclosure initiative, and he expects a much larger proportion of participants to come from this region.
Baker & McKenzie has already begun receiving inquiries from US taxpayers in Asia about the program since it was launched last week, he added.
This second initiative comes with tighter rules - the taxpayer would have to pay back-taxes and interest for up to eight years, and the penalty has been raised from 20 per cent to 25 per cent of the highest bank account balance over the last eight years.
Still, anyone hiding assets would do well to come forward, said KPMG tax partner Dennis McEvoy. "The risk of IRS detection is increasing, and failure to come forward will lead to significantly higher penalties and possible criminal prosecution," he said.
Mr Weisman agreed: "These days, governments pay commissions for information that could lead to the collection of tax. There have been instances where confidential information has been stolen and sold to governments.
"In the past, some US people living in Asia felt that the practical risk from non-compliance was not high, but they would be foolish not to recognize that we live in a much more transparent world today."
Reprinted courtesy of Straits Times Indonesia. To subscribe to Straits Times Indonesia and/or the Jakarta Globe call 2553 5055.
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