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October 31, 2009

Individual Income Tax Rates Around the World

We often are asked where is the best country to live and work in to reduce foreign taxes.  Wikepedia has a chart showing the various income tax rates for individuals and corporations in various countries. Check it out here.   Of course you can always consider Dubai which has no taxes.

Remember, so long as you are a US Citizen or permanent resident you still must file your US form 1040 with the IRS each year and report your worldwide income. Failure to file  timely special forms required for foreign financial accounts, foreign corporations, partnerships and trusts, and other related forms can also result in substantial penalties.

Mr. Schulman is pictured.  He is the Commissioner in charge at the INTERNAL REVENUE SERVICE and is primarily responsible for the dramatic  increase in international tax regulation at that agency.

October 27, 2009

RS Commissioner Doug Shulman's remarks before the AICPA's National Conference on Federal Taxation in Washington, D.C., on Oct. 26, 2009

In prepared remarks before the AICPA's National Conference on Federal Taxation on Oct. 26, IRS Commissioner Doug Shulman touched on a wide array of topics but the comments that will most likely attract the most interest involve what he called “the globa liz ation of tax administration.” Specifically, Shulman spoke of the dividends to be rea liz ed from the recently closed offshore settlement offer, and of the formation of a new Global High Wealth Industry group housed within its Large and Mid-Size Business (LMSB) operating division.
New IRS focus on global high wealth industry. Shulman announced that IRS was in the process of forming a Global High Wealth Industry group housed within its Large and Mid-Size Business (LMSB) operating division. This new unit will centra liz e and focus IRS compliance expertise involving high-wealth individuals and their related entities, which can often have an international component. Initially at least, IRS will be looking at individuals with “tens of millions of dollars of assets or income.”
A new unit was necessary, Shulman said, to properly deal with high wealth individuals' use of sophisticated financial, business, and investment arrangements with complicated legal structures and tax consequences. These may include trusts, real estate investments, royalty and licensing agreements, revenue-based or equity-sharing arrangements, private foundations, privately-held companies, and partnerships and other flow-through entities that require looking at the entire, and often huge, spectrum of transactions and entities. A single high wealth individual may have actual or ben eficial ownership of numerous related entities, sometimes alone and sometimes along with other family members or business associates. Shulman added that there are “other tax considerations regarding high wealth individuals, including international sourcing of income and tax residency, and offshore structures and bank accounts, to name just a few.”
IRS's game plan will be to take a unified look at the entire web of business entities controlled by a high wealth individual, to better understand the entire economic picture of the enterprise controlled by him or her and to assess the tax compliance of that overall enterprise (transfer tax as well as income tax issues). Shulman revealed that IRS has already begun hiring some agents and specialists, such as flow-through specialists and international examiners, and will add over time individuals with specia liz ed skills and expertise, such as economists to identify economic trends, appraisal experts to advise on valuation issues, and technical advisors to provide industry or specia liz ed tax expertise. Shulman said IRS “will also build new risk assessment techniques to identify high-income and high-wealth individuals and their related enterprises that should be reviewed holistically.”
Offshore income settlement offer. Over 7,500 people came forward under IRS's special offshore voluntary compliance program that ended on Oct. 15 (see Federal Taxes Weekly Alert 09/24/2009 and 04/02/2009). Shulman wouldn't speculate on how much tax money would be salvaged from the initiative but stressed that the effort will continue to pay off as taxpayers who are now back in the U.S. tax system will continue to pay taxes on their offshore income in the years to come.
Shulman also revealed that IRS will be mining the voluntary disclosure information from people who have come forward to identify financial institutions, advisors, and others who promoted or otherwise helped U.S. taxpayers hide assets and income offshore and skirt their tax responsibilities at home. In addition, IRS will increase its scrutiny of annual FBARs (Report of Foreign Bank and Financial Accounts) or foreign bank and financial account reports. Current law requires that U.S. taxpayers file an FBAR if their foreign financial accounts total more than $10,000, but current rules make it difficult to catch all of those who do not, Shulman said. Aside from the President's proposal for legislation that would toughen the reporting rules, there is an active project at IRS working to update definitions and instructions under the current FBAR rules. Shulman also revealed that future offshore efforts would be focused on multiple points around the globe, and that IRS is opening international Criminal Investigation offices in several new locations around the world ( Beijing , Panama City and Sydney ).

October 16, 2009

7,500 Give Offshore Tax Data to I.R.S.

Published: October 14, 2009

More than 7,500 American taxpayers have voluntarily disclosed secret offshore accounts to the Internal Revenue Service, which is cracking down on overseas tax evasion, the agency said on Wednesday.

Those who have come forward have provided information about accounts holding from $10,000 to $100 million since the I.R.S. extended a Sept. 23 deadline for participating in the voluntary disclosure program, said Doug Shulman, the I.R.S. commissioner.

People who come forward voluntarily can avoid criminal prosecution and their identities will remain a secret under federal law requiring tax records to be kept confidential.

The partial amnesty ends Thursday and will not be extended a second time, he said.

Americans with undeclared offshore accounts have been under growing pressure since Switzerland agreed Aug. 19 to hand over data to the authorities in the United States on as many as 4,450 UBS accounts. The move was to settle a lawsuit in which the United States had sought information on as many as 52,000 accounts.

“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers skirt their obligations, Mr. Shulman said in a conference call. “This entire effort is not just about UBS and a single country.”

It is not yet known how much overlap might exist between the names that UBS will eventually provide and the 7,500 people who have come forward to the I.R.S., Mr. Shulman said.

The I.R.S. will open offices in Beijing, Panama City and Sydney in connection with the investigation, which has revealed accounts held in 70 countries and on every continent except Antarctica, he said. The agency also intends to add about 800 employees in the next year and add staff to eight existing overseas offices, including Hong Kong and Barbados.

October 1, 2009

Congressional report focuses on international tax avoidance and evasion:

  The annual cost to the federal government of offshore tax abuses may reach as high as $100 billion per year, according to a Congressional Research Service (CRS) report released on Sept. 18. (R40623 - Tax Havens: International Tax Avoidance and Evasion) The government loses income tax revenue from individuals and corporations when profits and income are shifted into low-tax countries known as tax havens. Multinational firms are adept at artificially shifting profits from high-tax to low-tax jurisdictions, the report noted. One such method is to shift debt to high-tax jurisdictions. “Since tax on the income of foreign subsidiaries (except for certain passive income) is deferred until repatriated, this income can avoid current U.S. taxes and perhaps do so indefinitely,” CRS said. Individuals can evade taxes on passive income, such as interest, dividends, and capital gains, by not reporting income earned outside the U.S. There are several legislative proposals that address the problem of tax havens and associated evasion issues, including the Stop Tax Haven Abuse Act (S. 506, H.R. 1265; draft proposals by the Senate Finance Committee; two other related measures, S. 386 and S. 569; and an Obama administration proposal. “Most provisions to address profit shifting by multinational firms would involve changing the tax law by repealing or limiting deferral, limiting the ability of foreign tax credit to offset income, addressing check-the-box [a regulation introduced in the late '90s with provisions that were originally intended to simplify questions of whether a firm was a corporation or a partnership and that had unintended consequences for foreign firms], or even formula apportionment,” the report said. The administration's proposals include one to disallow overall deductions and foreign tax credits for deferred income and restrictions on the use of hybrid entities. Individual evasion could be reduced by proposals to increase information reporting and expand enforcement by shifting the burden of proof to the taxpayer and increasing penalties.