A NEW WAVE OFFSHORE
September 15, 2006
Riding the rapid expansion of the Internet, some parts of the offshore banking industry are making tax-avoidance techniques -- once mainly offered to high-net-worth individuals in private conferences -- available online to average Americans, says USA Today.
Along with the number of new accounts being created, the amount of money being transferred has also greatly increased:
- As much as $1.6 trillion in North American wealth is likely held in offshore accounts, according to a 2005 report by the Tax Justice Network, an international group opposed to tax avoidance.
- Americans with assets offshore probably avoid about $50 billion in taxes annually, according to an estimate by Reuven Avi-Yonah, head of the International Tax Master of Law Program at the University of Michigan Law School.
- Hundreds of companies and promoters now use the Internet to guide Americans and others who transfer assets to offshore banks or trusts, according to a Senate subcommittee report.
- Offshore companies are offering corporations, bank or brokerage accounts and mailing addresses offshore for as little as $2,500, allowing more people to ship more money out of the country.
Although placing assets in international trusts and banks is not illegal, says McCoy, using such transfers to avoid federal, state and local taxes while retaining control of the assets is considered a possible tax violation. But as long as offshore companies do not facilitate tax avoidance and do not control a client's assets, there is little regulatory bodies can do.
And proving ownership and collecting from those who have moved assets offshore isn't easy. In testimony to a Senate subcommittee, IRS Commissioner Mark Everson said the agency investigates alleged offshore tax abuses, but this is an area where the agency still has a long way to go.
Source: Kevin McCoy, "Offshore tax shelters not just for the rich," USA Today, September 14, 2006.
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