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G-20 Stamps Out Tax Havens

OECDThe fallout from the recent tax evasion settlement with UBS is reverberating throughout the G-20 community.  As we reported back in October,  the French Governments action directing banks to close branches and subsidiaries in non-OEDC compliant jurisdictions will pressure all G-20 participants to adopt a more uniform tax code and enforcement practice.  The drive to strengthen the respect of tax treaties and the closure of havens to custody assets beyond the reach of national tax authorities signals a new era in multinational cooperation and the eclipse of radical free market tax practices.

The principal drivers for this unprecedented level of cooperation and standardization is the dire need for national tax authorities to recognize and tax revenue streams to help address the burgeoning budget deficits the global economic crisis has has wrought.

Clearly the crackdown on tax evasion is gaining momentum since the global financial crisis has devastated national treasuries.  Enormous expenditures on stimulus programs and dramatically falling tax receipts has created a perfect storm and has created an enormous threat to the fiscal soundness of national treasuries.

Forbes reports that Singapore has become the latest in a flurry of jurisdictions complying with Office of Economic Cooperation and Development standards on transparency and exchange of information for tax purposes.  Fifteen jurisdictions have come into compliance since April 2009.  In addition to Singapore and the sea change occurring in the Suisse banking industry; other  governments that have lost revenue to tax havens are individually taking tough action:

–The U.K. government has informed the Isle of Man that it will reduce revenue transfers of value-added tax receipts to the island by 50 million pounds next year, 9% of the island’s revenue.

–French banks are starting to close down their operations in tax havens.

–In Germany, the hiding of funds in Liechtenstein bank accounts has prompted a backlash against tax havens.

–In the United States, White House advisor Paul Volcker in December is due to report on ways of eliminating revenue losses to tax havens.

This heightened regulation and standardization amongst  G-20 tax authorities is quickly closing any regulatory tax arbitrage opportunities for global investors.  The closure of preferential tax domiciles will heighten the power and reach of national tax agencies enforcement capabilities and the scope of their examination reach.  The IRS is stepping up its enforcement and institutional assets to assure that private equity and hedge fund industries comply with all the anti-money laundering laws and stringent tax codes.

Sum2’s IARP helps investment managers assess and manage the growing threat of audit and tax enforcement risk.  Sum2’s CARP helps large and mid-size corporations assess compliance and manage  IFI audit risk.

Risk: audit, enforcement, regulatory, tax, reputational, litigation

November 16, 2009 Posted by | AML, CARP, corruption, IARP, IRS, legal, OECD, private equity, regulatory, reputational risk, risk management, Tax | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Get Ready for Here They Come

GEITHNER0031175.jpgTreasury Secretary Tim Geithner’s recent testimony on Capitol Hill is a clear warning to corporate America that the IRS is shifting gears.  While the Secretary stated the IRS requires a modest amount of money to reform the tax code and the complicated super system of laws; he also stated that he is seeking a larger allotment for enforcement purposes.  Clearly for the immediate future the focus of the agency will be to insure corporations are in full compliance of existing tax laws and statutes.

According to the article,  Geithner wants $332 million to go to new IRS enforcement efforts, including $128.1 million to improve international tax compliance. The balance of the funds would be used to support 755 employees to increase examinations of tax returns for businesses and high-income individuals; 300 employees to expand the IRS document-matching program, which compares tax returns to other forms such as W-2s and 1099s; and an additional 491 employees to improve collection operations and build two new IRS automated collection center sites.

Corporate tax professionals need to be vigilant and begin to design a strategy to mitigate rising tax risk.  Sum2’s Corporate Audit Risk Program (CARP) is a unique tool that helps corporate tax managers and professionals assess, manage and mitigate tax risk exposures.

Learn more about how CARP can help you manage this mounting risk factor here: manage tax risk.

You Tube Music Video: The Temptations, Get Ready

May 25, 2009 Posted by | CARP, IRS, regulatory, risk management, Tax, Treasury | , , , , , , , , | Leave a comment