Good News, Bad News Regarding Offshore Finances
Depending on what type of entity you are and what your situation is regarding offshore bank accounts and offshore corporate headquarters, the news this week may be considered good or bad, invasive or a relief.
Corporations that have relocated offshore or that have considered doing so can breathe a sigh of relief, or at least temporarily so, as the current Congress gets ready to pack its bags for home without passing any measures to punish U.S. companies with offshore locations.
Democrats have pushed for the corporate inversion provisions that penalize U.S. corporations relocating outside the country in an effort to reduce taxes, but Republicans and corporate lobbyists who warned of acting too quickly without delving into the real problem behind corporate inversions prevailed and the measures were tabled, at least for now.
"When you really look in depth, the reason we're losing people offshore is the inequity of our tax code as compared to our competitors overseas," said Speaker of the House Dennis Hastert (R-IL).
Assistant Treasury Secretary for Tax Policy, Pam Olson, echoed Speaker Hastert's views last week in a speech before the Senate. "Our objective must be to ensure that the U.S. tax system maintains the competitiveness of U.S. businesses in the global market place."
Speaking for the Democrats, Senate Majority Leader Tom Daschle (D-SD) stated his distaste for lobbyists and special interest groups that "convinced the Republican leadership they would not tolerate" a bill that would penalize corporations for locating offshore.
IRS Delves Deeper into Offshore Credit Card Accounts
Meanwhile, the Internal Revenue Service has requested judges to issue summonses to at least 70 companies, asking that they turn over customer records in the agency's ongoing effort to trace credit card holders who use offshore accounts.
Included in the group slated to receive summonses are airlines, hotels, car dealerships, sports teams, and retailers. "Our goal is simple and straightforward - identify the people who may be using these offshore cards to evade paying their taxes," said IRS Commissioner Charles O. Rossotti.
The IRS is convinced that the U.S. Treasury is losing between $20 and $40 billion in tax revenue annually due to U.S. taxpayers using offshore accounts to stash income, then drawing on the funds by making payments with credit cards issued by the offshore banks.
Included in the probe are companies such as Disney, America West Holding Corp., and the Florida Marlins.