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Thursday, May 19, 2011
Lobbyists, IRS Square Off Over New Law to Catch Rich Tax Dodgers
From Denny: It's an election year and reeling in tax dodgers is a populist position. Americans are furious the wealthy and corporations don't pay taxes at all or very little, certainly not their fair share.
How much does the government lose to rich tax cheats?
Did you know the Treasury Department loses as much as $100 billion each year in owed taxes because of offshore accounts? Think how that would affect the bottom line to ease the budget deficit - instead of taking away school lunch programs for needy children.
New tax dodger law
The good news is there is a new law in town. It's called the Foreign Account Tax Compliance Act (FATCA). Foreign financial institutions must report accounts held by American citizens to the U.S. government. The penalty if they fail to report? Not providing that information means those firms face a 30 percent withholding tax on their U.S. revenue. Ouch!
The bad news is that the law does not take effect until 2013 even though it was passed in March 2010. Worse, now enter the gang of lobbyists - yes, more than the usual 100 per lawmaker already leeching off the taxpayers in Washington - who are descending upon the capitol to reject or modify this law. Screaming for help are the foreign financiers and trade associations that have set their sights upon nasty K Street as their messiah.
Foreign governments, pension funds, investment funds, banks lobby for exemptions to new law
Right now the IRS is crafting regulations to implement that new law to prevent offshore tax evasion. Get this, these institutions are actually ballsy enough to demand an exemption from having to report this information. How annoying can you get?
From Tom Yancey, a partner in Sidley Austin's tax firm: "It is going to affect all foreign financial institutions unless the IRS grants them an exemption. It includes banks, brokers, investment funds and some insurance companies. It has a very broad scope."
For all his protestations the law sure sounds good to the American middle class who are weary of bearing the tax burden in this country all the time. "Let the tax lobbyists descend upon Washington!" is the cry from over six banks and business groups with overseas ties ready to trounce the new law if they can.
Now the Australian Bankers' Association is getting in the act. The firm lobbying for them is Patton Boggs. Their lead guy is Stephen McHale, a real turncoat. He worked in the Treasury Department for 12 years. He was also an acting general counsel. Who wants to stand in line for the privilege of spitting on his expensive alligator shores?
Another American turncoat helping the tax dodgers? Try Nick Giordano, who was chief tax counsel for the Senate Finance Committee and a former aide to Senator Max Baucus (D-Montana). Today he is lobbying for Barclays Capital, Inc. bank via the law firm Washington Council Ernst & Young.
Another Barclays lobbyist and WCEY's executive director, Jeff Levey, claims Congress left it to the executive branch for how the tax law will be applied. "There’s just a tremendous amount of detail left to the IRS and Treasury to determine through regulations, so it would make sense that financial institutions would want to be fairly aggressive in talking to regulators."
Everyone who finds this practice downright obnoxious please raise your hand. OK, I sure do see a lot of you waving both your hands wildly in the air. This is outrageous. Who says these guys deserve a place at the negotiating table? It's like asking the fox over to Sunday dinner at the hen house.
Canada, Japan, Britain
The next American traitor? Try Deloitte Tax. Who hired them? These guys:
* Investment Funds Institute of Canada
* Life Insurance Association of Japan
* Association of Private Client Investment Managers & Stockbrokers (London-based trade group)
Who else is lobbying to weaken the regulations before they take effect? Some of the biggest banks, biggest insurance companies and biggest finance in America:
* New York Life Insurance Co.
Who represents the average guy's interests - anyone out there who cares?
So, all the heavyweights have lined up on their side of the aisle. After all, they represent billions of dollars in varied interests. So, who is lined up on the other side to represent the American taxpayer getting taken advantage of here?
Citizens for Tax Justice
There is the group called the Citizens for Tax Justice. The senior counsel for federal tax policy, Rebecca Wilkins, believes the reason foreign banks are lobbying is because they fear losing their U.S. clients to this law.
"They are using arguments like ‘competitiveness’ and ‘regulatory burden.’ What they are really afraid of is they are going to lose their tax-evading customers."
Hungary, the European Union, Cayman Islands
Turns out it's more than foreign banks living in fear of this tax evasion law. It's foreign governments as well. The Hungarian Finance Minister, Gyorgy Matolcsy and the European Union tax commissioner, Algirdas Semeta, are concerned how this law could harm the European financial sector. They were so upset they sent a letter to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman requesting a dialogue on how to apply the law without causing an issue.
Now that's "rich." It gets better. The now famous Cayman Islands, home of the most tax dodgers, are wetting their pants about the impending tax rules. Just last month the government sponsored a seminar about the new changes at the Marriott Grand Cayman Island Beach Resort. It was an overflowing crowd.
Yes, the Cayman government also filed with the American government wanting to figure out how to best apply the new law. Apparently, "they have concerns about what exemptions will be granted to investment funds and other like structures they believe do not present a high risk for U.S. tax evasion," according to Tom Yancey, a partner in Sidley Austin’s tax firm who is lobbying for the Cayman Island government.
Finland pension brokers join the lobbyist stampede
But hey! Let's not leave anyone out at the feeding trough of the American Treasury. Let Finland in to lobby too just to be fair and balanced. Veritas Pension Insurance Co. wants an exemption for themselves as well as other Finnish pension providers.
This handy tax evasion law showed up on the scene after Switzerland's UBS bank scandal. What happened was that UBS helped thousands of American evade U.S. taxes by setting up Swiss bank accounts for them. Uh, busted, and in February 2009 the bank paid some stiff fines to the tune of $780 million to settle both criminal and civil charges.
Fortunately, there are some public interest groups keeping a watchful eye on this law as it moves through the regulatory process. Citizens for Tax Justice is one of those groups doing so because it was the one that lobbied for this new law against tax haven abuse in the first place.
FACT coalition to help fight lobbyists seeking to weaken the new law
There is also a coalition known as FACT - Financial Accountability and Corporate Transparency - of which this group is a member. The coalition is endeavoring to fight the tax dodging evaders and help bring down the federal deficit by getting those tax dodgers to pay their fair share.
Check out their mission statement on their site: "Global Financial Integrity (GFI) promotes national and multilateral policies, safeguards, and agreements aimed at curtailing the cross-border flow of illegal money. In putting forward solutions, facilitating strategic partnerships, and conducting groundbreaking research, GFI is leading the way in efforts to curtail illicit financial flows and enhance global development and security."
About the FACT coalition: "At a time when countries around the world face budget crises, economies continue to bleed massive amounts of revenue due to secrecy in the financial system which facilitates corruption, tax evasion and money laundering. Shell corporations, anonymous trusts and bank secrecy both in the United States and abroad make it easy for criminals, terrorists, government officials and even otherwise legitimate multinational companies to hide their money and difficult for law enforcement and tax authorities to do their jobs.
The FACT coalition believes it is critical to debunk the myths and false claims of those who want to keep the status quo under the guise of promoting competition and protecting businesses. Our campaign will raise awareness and demonstrate broad support for real reforms. "
Tax dodgers, tax cheats, turncoats. Why do they still need American citizenship? It's time for Americans to stand up this election year and turn on the lobbyists who have been owning our government for far too long. Remove the politician puppets - and keep removing them every election cycle - until the lobbyists finally can't buy that new politician. Only tenacity will win the battle to take back our government from these leeches.
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