The United States and United Kingdom are restricting the basic financial rights of offshore jurisdictions, a top bank official has charged. Responding to petitions filed by the US Internal Revenue Services that Leadenhall Bank & Trust Company’s clients used offshore accounts or credit cards to avoid paying millions of dollars in taxes, William Jennings, Managing Director of the institution, maintained that Leadenhall has not been contacted by the IRS over the tax-collection issue.
In an exclusive interview with The Guardian over the weekend, he further contended that if there is a tax issue involved when opening accounts, or at any other time, then clients and/or their tax and legal advisors need to deal with it.
This has always been the case, he said.
Last Thursday, the IRS announced that more than 1,200 people have admitted that they used offshore accounts or credit cards to avoid paying over $100 million in taxes.
On March 13, the U.S. Justice Department filed summons enforcement petitions in seven District Courts against individual taxpayers related to an Offshore Credit Card Project.
This was said to be the first time in the initiative that the IRS has taken this step, with previous court efforts centring on credit card companies and businesses.
The summons enforcement petitions were filed against individuals who used MasterCard payment cards issued by the Bahamas-based Leadenhall Bank & Trust Company. The enforcement petitions were filed after the individuals did not produce for examination books or records requested in earlier IRS summonses.
“We have not been contacted by the IRS or any other government agency,” Mr Jennings insisted. “People from all over the world, not just the United States, have accounts in jurisdictions outside their home countries, and for many reasons, which have nothing to do with mitigation of taxes.”
He said that one of the first offshore banks to be established anywhere in the world was set up in The Bahamas in 1936, so that the control of assets could be moved from Europe, “thanks to a Mr. Adolf Hitler.”
Today bank accounts and credit card accounts are held with major global financial institutions around the world, he said, many of them based in the U.S., such as Chase Citibank, JP Morgan, Barclays, and Bank of Nova Scotia, Royal Bank of Canada, S G Hambros, and UBS.
“These institutions have far more US clients than we do,” Mr Jennings said, adding that,
as far as he was aware, in a free world, persons still have the right to arrange their financial affairs as they saw fit, in accordance with the laws of the country in which they resided.
He questioned whether the U.S. and other countries, such as the UK, wanted to curtail or restrict such fundamental rights.
Mr Jennings said that when the U.S. and the other industrialised nations of the Organisaiton for Economic Cooperation and Development, “wax lyrical about offshore accounts they need to be reminded that you can still issue bearer shares in the U.S. and UK.”
“The UK is probably still one of the largest tax havens in the world, based on the distinction it makes between domicile and residency,” he said, adding that, “The U.S. offers huge tax and other concessions to foreign companies locating to the US and to US exporters, which by world trade organisations are considered as illegal subsidies.”
In the meantime, according to the IRS, persons who did “turn themselves in,” avoided prosecution and possible penalties. They also, reportedly, helped the IRS to discover 80 new “promoters,” who will be pursued for marketing and selling illegal offshore accounts.
“We are discovering a gold mine of information,” Bob Wenzel, acting IRS Commissioner, said. “This will provide us with a valuable map to track offshore cheating. The IRS intends to take full advantage of these leads.”
He said that investigators have spent months tracing the identities of persons holding thousands of Visa, MasterCard and American Express cards issued by banks in offshore tax havens, with the records having been obtained through previous court orders in an attempt to pierce secrecy laws that protect bank accounts.
After obtaining the records, he continued, IRS officials established the voluntary compliance programme to “flush out promoters and encourage taxpayers to come clean.”
He said that those who stepped forward under the partial amnesty programme included lawyers, dentists, business executives and heirs to estates. At least $50 million in uncollected taxes was identified, he said, with a number involving unpaid taxes exceeding $1 million.
Those who responded to the amnesty were required to provide full details of the promoter who arranged the offshore accounts, with about 240 applicants claiming the offshore promoters had tricked them out of their money.
The IRS has announced that it will pursue criminal and civil penalties against individuals who did not turn themselves in, and continue to promote tax shelters or use offshore accounts to conceal income. The IRS also reportedly encountered a number of questionable amended returns from persons hoping to pay the taxes owed without being prosecuted.
According to Pam Olson, assistant treasury secretary for tax policy, “Taxpayers that have not come forward will be pursued by the IRS and will be subject to more significant penalties and possible criminal sanctions.”
The IRS is reportedly also pursuing corporate tax shelters, with the objective of stopping companies from establishing “shell headquarters” in tax havens such as Bermuda, to cut their U.S. tax liabilities by millions of dollars.
By Lindsay Thompson, The Nassau Guardian
