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U.S. seeks credit card records on tax havens
By Jim Loney
MIAMI, Oct 20 (Reuters) - Seeking tax cheats, the U.S. Internal Revenue Service wants the credit card records of people who may have used Caribbean offshore tax haven accounts to help them evade U.S. income taxes.
The IRS filed a lengthy petition Wednesday asking a Miami U.S. District Court to issue summonses to American Express Co (AXP) and MasterCard International to turn over 1998 and 1999 transaction records for U.S. taxpayers who have credit cards issued by banks in the Cayman Islands, Bahamas and Antigua and Barbuda.
An affidavit filed with the summons request said the U.S. Treasury loses an estimated $70 billion yearly from individual taxpayers who use offshore accounts to evade taxes.
"The records...will reveal transactions by persons who may be liable for United States income taxes and will enable the Internal Revenue Service to investigate whether those persons have complied with internal revenue laws," the petition said.
Small Caribbean nations, some of which impose no incomes taxes, have long been thriving ports for the offshore assets of wealthy Americans. The Cayman Islands, a tiny British colony in the western Caribbean with just 35,000 people, is the world's fifth largest financial center with some 600 registered banks.
American Express said it had not received the documents as of midday Friday and would not comment until it had seen them.
MasterCard International issued a brief statement saying it has "always cooperated with, and will continue to cooperate with, investigations by governmental agencies.
"Once we've had the opportunity to review the full details of the petition we will evaluate whether we have, and are able to provide, the requested information," the statement said, adding that MasterCard said it was "mindful of customers' privacy concerns."
Officials with banking industry groups in the Cayman Islands, a British colony, and the Bahamas, a former British colony, were not immediately available for comment.
Antigua and Barbuda and the Bahamas were among 35 nations named as potential paradises for tax dodgers on a blacklist issued last June by the Organization for Economic Cooperation and Development. The Cayman Islands was left off the list after it promised to meet international norms within five years.
The Bahamas and the Cayman Islands both were named in June on a 15-nation blacklist of offshore financial centers deemed "uncooperative" in the global fight against money-laundering. The list was compiled by the Financial Action Task Force, a body created by G-7 economic powers to coordinate the fight against hot money.
The IRS petition said banks in offshore tax havens openly solicit business on the Internet and through other means, offering offshore trusts, bank accounts and corporations that are "effective in reducing tax."
Once the money is moved to an offshore account, the account holder is faced with the problem of how to access the money. That is where the credit card comes in, according to IRS court documents.
The account holder can use a credit card issued by the bank where the account was created to make purchases and the payments on the credit card tab can be discreetly made from the account, "away from the scrutiny of U.S. investigators," the court documents said.
"We believe the credit card is the leading way to bring money back onshore," said John Buchanan, an IRS manager supervising the case.
An affidavit from IRS agent Joseph West said it was likely that some cardholders "may have been under-reporting income, evading income taxes or otherwise violating the internal revenue laws of the United States."
A Cayman government official said the British territory would leave the current IRS investigation to the legal process but said banks in its jurisdiction are told not to market services based on secrecy.
"It's the government's position that it does not condone any such marketing activities that would encourage citizens to break the laws of their home countries," the official said, noting that it was the responsibility of taxpayers to make proper tax filings.
A court affidavit by Jack Blum, a Washington D.C. attorney who is considered an expert on offshore bank secrecy, said the best available estimates indicated $5 trillion in assets are held offshore, including $600 billion in bank deposits in the Cayman Islands alone. He said the use of offshore bank accounts to evade taxes is a "massive problem" for the United States.
"At a minimum, I estimate the annual losses to the U.S. Treasury through offshore evasion by individual taxpayers at $70 billion a year," Blum said in the document.
By Jim Loney
MIAMI, Oct 20 (Reuters) - Seeking tax cheats, the U.S. Internal Revenue Service wants the credit card records of people who may have used Caribbean offshore tax haven accounts to help them evade U.S. income taxes.
The IRS filed a lengthy petition Wednesday asking a Miami U.S. District Court to issue summonses to American Express Co (AXP) and MasterCard International to turn over 1998 and 1999 transaction records for U.S. taxpayers who have credit cards issued by banks in the Cayman Islands, Bahamas and Antigua and Barbuda.
An affidavit filed with the summons request said the U.S. Treasury loses an estimated $70 billion yearly from individual taxpayers who use offshore accounts to evade taxes.
"The records...will reveal transactions by persons who may be liable for United States income taxes and will enable the Internal Revenue Service to investigate whether those persons have complied with internal revenue laws," the petition said.
Small Caribbean nations, some of which impose no incomes taxes, have long been thriving ports for the offshore assets of wealthy Americans. The Cayman Islands, a tiny British colony in the western Caribbean with just 35,000 people, is the world's fifth largest financial center with some 600 registered banks.
American Express said it had not received the documents as of midday Friday and would not comment until it had seen them.
MasterCard International issued a brief statement saying it has "always cooperated with, and will continue to cooperate with, investigations by governmental agencies.
"Once we've had the opportunity to review the full details of the petition we will evaluate whether we have, and are able to provide, the requested information," the statement said, adding that MasterCard said it was "mindful of customers' privacy concerns."
Officials with banking industry groups in the Cayman Islands, a British colony, and the Bahamas, a former British colony, were not immediately available for comment.
Antigua and Barbuda and the Bahamas were among 35 nations named as potential paradises for tax dodgers on a blacklist issued last June by the Organization for Economic Cooperation and Development. The Cayman Islands was left off the list after it promised to meet international norms within five years.
The Bahamas and the Cayman Islands both were named in June on a 15-nation blacklist of offshore financial centers deemed "uncooperative" in the global fight against money-laundering. The list was compiled by the Financial Action Task Force, a body created by G-7 economic powers to coordinate the fight against hot money.
The IRS petition said banks in offshore tax havens openly solicit business on the Internet and through other means, offering offshore trusts, bank accounts and corporations that are "effective in reducing tax."
Once the money is moved to an offshore account, the account holder is faced with the problem of how to access the money. That is where the credit card comes in, according to IRS court documents.
The account holder can use a credit card issued by the bank where the account was created to make purchases and the payments on the credit card tab can be discreetly made from the account, "away from the scrutiny of U.S. investigators," the court documents said.
"We believe the credit card is the leading way to bring money back onshore," said John Buchanan, an IRS manager supervising the case.
An affidavit from IRS agent Joseph West said it was likely that some cardholders "may have been under-reporting income, evading income taxes or otherwise violating the internal revenue laws of the United States."
A Cayman government official said the British territory would leave the current IRS investigation to the legal process but said banks in its jurisdiction are told not to market services based on secrecy.
"It's the government's position that it does not condone any such marketing activities that would encourage citizens to break the laws of their home countries," the official said, noting that it was the responsibility of taxpayers to make proper tax filings.
A court affidavit by Jack Blum, a Washington D.C. attorney who is considered an expert on offshore bank secrecy, said the best available estimates indicated $5 trillion in assets are held offshore, including $600 billion in bank deposits in the Cayman Islands alone. He said the use of offshore bank accounts to evade taxes is a "massive problem" for the United States.
"At a minimum, I estimate the annual losses to the U.S. Treasury through offshore evasion by individual taxpayers at $70 billion a year," Blum said in the document.
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