In a ruling issued Oct. 30, U.S. District Judge Adalberto Jordan ordered MasterCard and American Express to turn over account holder records in Antigua, The Bahamas and the Cayman Islands.
The IRS brought the case in Miami because Caribbean credit card accounts clear through Miami subsidiaries of the two companies.
The offshore accounts belong largely to middle- and upper-middle class individuals whose goal is to shelter income from taxation. Demand for these accounts has increased in the past decade, as investors earn large profits on stock portfolios.
Typically, U.S. citizens open these accounts in Caribbean tax havens and register deposits in an offshore bank. The bank then provides the client with a credit card that draws on the account. In many cases, offshore banks reinvest the assets in the United States, but the American owner pays no taxes on these investments.
If the IRS proves U.S. citizens used offshore accounts to avoid taxes, the court’s ruling could lead to thousands of criminal charges and fines totaling millions of dollars.
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