IRS to offer tax amnesty

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The New York Times says:

The Internal Revenue Service, under pressure to bring in money to the faltering economy, plans to give offshore tax evaders a big break.

The agency announced on Thursday a plan that lowers a penalty levied on wealthy Americans who stash billions of dollars overseas to evade taxes.

In another shift, the I.R.S. will generally not prosecute taxpayers who come forward voluntarily, provided they are not drug dealers, arms merchants or others with ill-gotten gains. And it will not assess a 35 percent penalty on money secretly transferred to foreign trusts — a common method of tax evasion.

In principle I don’t like this.

In practice I see the reason. The process of recovering tax from tax havens needs a kick start. Right now there will be a lot of people with cash stacked offshore in all the usual culprit locations who have need for it onshore. I suspect very strongly that this intention in this move is not just tax recovery but the incentivisation of remittances as well.

The amnesty is time limited, and penalties are still due — but reduced. No one is going to get away free — which is essential. I could live with this if I was a US taxpayer.

But there are conditions all reasonable US people will, I am sure, put on accepting it. The first is that those who confess are required to provide full details of what they have done — names, addresses of suppliers involved , details of structures etc. The reduced penalty comes at the price of information. Second, the US needs to make clear it will aggressively pursue those who do not come forward now. Third it needs to employ enough IRS staff to make use of this data. It does not right now which makes a mockery of the law enforcement process.

Do that and there’s a deal to be done, I suspect, for which the timing may be right.

Hat tip to Dennis Howlett


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