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Dec 28, 2013 by |

San Francisco Tax Fraud Lawyers Help Blow the Whistle on Offshore Tax Havens and Illegal Financial Centers

Offshore tax havens and finance centers have always had a grey area between tax evasion and tax compliance; however, tax havens and offshore finance centers have always had a large appeal for companies and individuals for exactly that reason. Despite the appeal of offshore tax havens and financial centers, tax abuse is rampant and should not go unreported. The experienced San Francisco tax fraud lawyers at Evans Law, Inc. can help if you suspect tax abuse in an offshore tax haven.

What is an Off-Shore Tax Haven?

A tax haven is a state, country or territory where certain taxes are levied at a low rate or not at all. Elements of a tax haven include: (1) no or nominal taxes; (2) lack of effective exchange of tax information with foreign tax authorities; (3) lack of transparency in the operation of legislative, legal or administrative provisions; (4) no requirement for a substantive local presence; and (5) self-promotion as an offshore financial center. The central feature of a haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions. The main element of their attractiveness is secrecy and this is exactly why the IRS is looking at corporations and individuals that use off-shore tax havens – what are they hiding? Matthew Valencia, et al., Storm Survivors, The Economist, Feb. 16, 2013 at 3-5.

There are many advantages and disadvantage to retaining an off shore account. Advantages include that offshore banks can sometimes provide access to politically and economically stable jurisdictions. Second, some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Third, offshore finance is one of the few industries, along with tourism, in which geographically remote island nations can competitively engage. Fourth, interest is generally paid by offshore banks without tax being deducted. Fifth, some offshore banks offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities. Lastly, offshore banking is often linked to other structures, such as offshore companies, trusts or foundations, which may have specific tax advantages for some individuals. Matthew Valencia, et al., The OFCs’ Economic Role: The Good, The Bad and the Ugland, The Economist, Feb. 16, 2013 at 6-7.

However, there are also many disadvantages with offshore banking which include that they can be less financially secure. Second, offshore banking has been associated in the past with the underground economy and organized crime, through money laundering. Third, offshore private banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. Lastly, the Bank Secrecy Act requires U.S. Taxpayers to file a Department of the Treasury Form 90-22.1 Report of Foreign Bank and Financial Accounts. If a corporation or individual is not filing such a Report, this can be a basis for potential liability and may be a red-flag to the IRS that they are trying to avoid United States tax laws. Id.

Tax Havens Are Throughout the World:

In the world, there are about 60 active tax havens, ranging from the Caribbean to Delaware, they include Alderney, Andorra, Anguilla, Antigua and Barbuda, Aruba, Antillas Holandesas, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda (known as the Reinsurance giant), Botswana, Britain (Known for shell companies/partnerships), British Virgin Islands (Known as an Incorporation Hub with strong links to China), Brunei Darussalam, Cayman Islands (Known as one of the most diversified), Campione D’Italia, Channel Islands (Known for Trusts and Banking), Cook Islands, Costa Rica, Cyprus (Known for Russian Connections), Dominica, Dubai (Known for Middle Eastern Connections), Ghana, Gibraltar, Grenada, Guatemala, Guernesey, Hong Kong, Ireland, Isle of Man (Known for Banking and Life Assurance), Israel, Jersey, Jordan, Labuan, Lebanon, Liberia, Liechtenstein (Known for Trusts and Connections with Switzerland), Luxembourg (Known for Corporate Offshore Funds), Macau, Madeira, Malta, Isle of Man, Marshall Island (Known for Strong Corporate Secrecy), Mauritius (Known for Connections with India and Africa), Monaco (Known as European Elite Tax Haven), Nauru, Netherlands Antilles, Niue, Norfolk, Oman, Panama (Known for Shell Corporations and Incorporation Factories), Philippines, St. Kitts and Nevis, St. Vincent, St. Lucia, Samoa, San Marino, Sark, Seychelles (Known for Russian and African Connections), Singapore (Known for Wealth Management and Trusts), Switzerland (Known for Offshore Private Banking), Turks and Caicos, UAE, United Kingdom, Uruguay, USA (Known for Offshore Banking in Miami and corporate anonymity in Delaware and Nevada), and Vanuatu. Within these havens, about $8 trillion of private financial wealth (out of a total of $123 trillion) sits in off shore bank accounts – be aware this number also excludes fixed assets and commercial transactions. These off shore accounts provide rich individuals and corporations with loopholes that allegedly permits them to do do things with their money that they wouldn’t be able to do in their home county, namely, avoid proper taxes. Matthew Valencia, et al., Storm Survivors, The Economist, Feb. 16, 2013 at 3-5.

The US is Prosecuting Companies and Individuals that Violate U.S. Tax Laws and You Can Help Be a Whistleblower and Collect a Reward if Money is Recovered:

The U.S. government is cracking down on illegal foreign accounts and new rules affecting tax returns require taxpayers with assets held offshore to make extensive disclosures to the Internal Revenue Service or risk harsh penalties. The goal being to expose secret accounts used to skirt U.S. taxe laws. The problem is that some people have long taken advantage of lax U.S. enforcement and foreign tax haven secrecy to stash assets abroad to evade taxes. As an example, in 2009, UBS admitted to helping people evade U.S. taxes, and paid $780 million as a penalty and was forced to disclose the names of more than 4,500 U.S. taxpayers with secret accounts at the bank. Congress responded to the UBS scandal by passing the Foreign Account Tax Compliance Act of 2010. Therefore, anyone with an undeclared foreign account should be on high alert and must report these off-shore accounts. The IRS has held two limited amnesties for offshore account holders in recent years, and more than 30,000 U.S. taxpayers have stepped forward to pay back taxes and stiff penalties in hopes of avoiding criminal prosecution. The IRS also has whistleblower statutes that allow for a reward to anyone who blows the whistle on companies or individuals that are evading United States tax laws and payments. Evans Law Firm, Inc, can help you file a whistleblower claim if you have confidential information about anyone that is avoiding the tax laws – call us at 888-503-8267 for a free and confidential consultation. Matthew Valencia, et al., Prospects: Sunshine and Shadows, The Economist, Feb. 16, 2013 at 15-16

Even as the IRS cracks down on illegal offshore accounts, financial advisers to the wealthy are spotting new opportunities for generous—and sometimes legal and sometimes illegal—tax breaks offshore. Often the tax savings come from putting an investment into an offshore corporation in order to preserve deductions that would disappear if the same investment were made through a U.S.-based entity. The result is that the investor owes U.S. tax on net income, not gross income. Furthermore, holders can take state-tax and other deductions curtailed by the alternative minimum tax; avoid some or all of the 3.8% Medicare tax on investment income for most couples with adjusted gross income above $250,000, and avoid limitations on itemized deductions for upper-bracket taxpayers. Furthermore, moving assets abroad may bring extra savings for those living in high-tax states. Id.

The synchronization of financial rules looks to be far in the future as there are still discrepancies in national tax rates, regulatory standards, and confidentiality laws. However abuse of the tax system should not go unreported. . Within companies, many employees come to learn about the tax abuse.. In some instances, tax whistleblowing has been applauded by the media. It should be known, of all countries where off shore financing takes place, America is the friendliest towards whistleblowers, due to its laws aimed at protecting whistleblowers. Last September, Brad Birkenfield was awarded $104 million, the largest amount ever to an individual, under the 1RS’s whistleblower program for reporting UBS to the authorities. As demonstrated by the IRS’ decision in the Birkenfeld case, whistleblower laws can be effectively used to combat corruption, illegal offshore tax evasion and money laundering. Matthew Valencia, et al., Whistleblowers: Who’s the Criminal, The Economist, Feb. 16, 2013 at 14.

For a free and confidential consultation with one of our San Francisco, California tax fraud attorneys about IRS Fraud, please call 415-4418669 or toll free at 888-503-8267 or send an email to or by visiting the Contact Us portion of this website.

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