Funds sent by the rich in America to tax havens abroad, intending to dodge the Internal Revenue Service (IRS) have attracted the eye of President Obama. He has announced reforms to the nation’s international tax code, say reports.
According to CNN, President Obama has plugged the loopholes which allow individuals to keep their money in tax shelters like Switzerland and Cayman Islands, thereby avoiding taxes in America. The reforms to the tax code will ensure that wealthy Americans will no longer be able to skip taxes running into billions of dollars.
Another prong of the tax code will advantage businesses who wish to invest in America rather than abroad. White House officials said more than $100 billion will be raised by removing tax advantages for investing abroad. The new plan will not allow companies to declare overseas subsidiaries as branches of the parent company not subject to taxes.
“There is no higher economic priority for President Obama than creating new, well-paying jobs in the United States. Yet today, our tax code actually provides a competitive advantage to companies that invest and create jobs overseas compared to those that invest and create those same jobs in the U.S. In addition, our tax system is rife with opportunities to evade and avoid taxes through offshore tax havens,” a press release from the White House points out. These two strategies would garner at least $210 billion in the next ten years.
“The IRS is already engaged in significant efforts to track down and collect taxes from individuals illegally hiding income overseas. But to fully follow through on this effort, it will need new legal authorities. Current law makes it difficult for the IRS to collect the information it needs to determine that the holder of a foreign bank account is a U.S. citizen evading taxation. The Obama administration proposes changes that will enhance information reporting, increase tax withholding, strengthen penalties, and shift the burden of proof to make it harder for foreign account-holders to evade U.S. taxes, while also providing the enforcement tools necessary to crack down on tax haven abuse,” reports the White House.
The Obama administration will be hiring almost 800 new people at the IRS to crack down on overseas tax losses. In February, UBS, the largest private bank based in Switzerland was ordered by the IRS to reveal names of wealthy Americans who evaded taxes and stashed their money away in offshore bank accounts.