Senator Levin Calls for Action on Offshore Tax Abuse

September 15, 2009 -- WASHINGTON – The United States should encourage its G20 partners to sanction offshore banks and jurisdictions that fail to cooperate with international tax enforcements efforts, Senator Carl Levin (D-Mich.) said today in a letter to President Obama urging U.S. leadership on tax haven issues at the G-20 summit in Pittsburgh next week. Levin will call for additional action to combat offshore tax abuse in a speech he will give tomorrow at an international conference on increasing transparency in global finance.

“We have the means to end offshore tax abuse if we have the political will to act,” Levin says in remarks prepared for his keynote address Wednesday evening to the conference, sponsored by the Task Force on Financial Integrity and Economic Development.

Article continues below...

In his letter, Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, calls for the G20 nations to bar tax haven banks from participating in the global financial system if they refuse to cooperate with law enforcement investigations of tax evasion.

Levin’s subcommittee, which has been investigating offshore jurisdictions over the last 10 years, has estimated that offshore tax abuse costs the U.S. treasury $100 billion a year in lost revenue.

In his letter, Levin encourages the President to push the G20 nations to adopt an approach on tax havens similar to successful methods currently in use in the United States to target international money laundering. With those methods, U.S. financial institutions can be barred from doing business with nations or financial institutions engaged in money laundering. A provision allowing the same measures to be applied to nations or financial institutions that impede U.S. tax enforcement is included in the Stop Tax Haven Abuse Act, which Levin introduced this year and which Congressman Lloyd Doggett has introduced in the House. President Obama has endorsed that bill and cosponsored similar legislation in the last Congress when a member of the Senate.

“If the legal mechanisms were in place, and a tax haven bank refused to cooperate with a tax investigation, the United States, acting on its own, could stop that tax haven from taking advantage of the U.S. financial system,” said Levin. “If other countries adopted the same legal mechanisms, our G-20 partners or a subset like the G-7 could act as a group to lock the offending bank out of the global financial system. Tax haven banks facing that type of united action would have a much harder time turning law enforcement away empty handed.”

Levin plans to outline additional actions that could be taken to combat offshore tax abuse in his speech tomorrow evening to the Task Force on Financial Integrity and Economic Development, a consortium of public agencies and private organizations focused on achieving greater transparency in the global financial system for the benefit of developing countries.

Those additional actions include the following:

• Legislation. Urging Congress to enact new legislation to strengthen U.S. laws, the Stop Tax Haven Abuse Act, S. 506, and the Incorporation Transparency and Law Enforcement Assistance Act, S. 569. The Stop Tax Haven Abuse Act would tighten reporting requirements and give law enforcement powerful new tools to combat tax haven abuses. The incorporation transparency act would put our own nation’s house in order by requiring the states to collect information on the beneficial owners of the corporations they register. Failure to collect such information currently impedes U.S. and international law enforcement efforts to stop corporate misconduct involving tax evasion, money laundering, and financial fraud.

• Client Names. Urging adoption of a new international consensus on sharing client names and account information from entities that facilitate tax evasion. In the United States, law enforcement agencies are entitled to such information. But most nations will not provide information under tax information exchange agreements unless the requesting nation presents specific taxpayer names. In a departure from prior practice, Switzerland recently agreed that, under its current treaty obligations, Swiss bank UBS can provide nearly 5,000 client names and other information to settle U.S. criminal and civil actions against the bank for helping those clients evade U.S. taxes. This interpretation of existing tax information exchange agreements, if it were to extend beyond Switzerland, would remove a major barrier to international tax enforcement.

• Trade Policy. Urging the Administration to adopt a new trade policy ensuring that nations who fail to cooperate with their international partners on tax enforcement aren’t rewarded in U.S. trade negotiations. For example, Panama, which committed to negotiate a tax information sharing agreement with the United States in 2002, has stonewalled those negotiations for seven years, while simultaneously seeking approval of a U.S.-Panama free trade agreement. “The United States should insist that Panama and other nations fulfill their international commitments on tax information sharing before extending to them the significant advantages of a free trade agreement,” said Levin.

Source: Senator Carl Levin