An offshore tax amnesty run by the US Internal Revenue Service (IRS) has collected more than $5 billion of ‘lost’ tax.
More than 33,000 taxpayers have confessed they have failed to declare their earnings from offshore investments and volunteered to pay back tax, interest and penalties since 2009.
Another 1,500 taxpayers are negotiating terms under the latest open-ended amnesty announced by the IRS.
Under the amnesty, penalties for not declaring offshore assets have increased to 27.5% from 25%, but ‘discount’ penalty categories of 5% and 12.5% are still available.
An offshore loophole exploited by some taxpayers with offshore accounts was also closed by the latest amnesty.
Under current law, if a taxpayer challenges the disclosure of tax information by a foreign government, the taxpayer is required to notify the US Justice Department of the appeal.
The IRS said that if the taxpayer fails to comply with this law and does not notify the US Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the amnesty.
“We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore,” said IRS Commissioner Doug Shulman.
“People are finding it tougher and tougher to keep their assets hidden in offshore accounts.”
The amnesty is the first part of a two-pronged campaign by the US government to tame tax management in overseas accounts.
The other is the controversial Foreign Account Tax Compliance Act (FATCA) that comes in to force from January 1, 2013 and compels foreign financial institutions to tell the IRS about cash and investments held in offshore accounts controlled by US taxpayers. Read our guide to FATCA here
FATCA gives the IRS more direct financial control over foreign investments than tax treaties, which are not in force with every government.