U.S. tax chief says offshore tax evasion biggest focus

WASHINGTON Mon Apr 13, 2009 3:53pm EDT

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WASHINGTON (Reuters) - The U.S. government plans to step up criminal prosecutions of tax cheats hiding money in offshore accounts and has seen a boost in individuals turning themselves in, the top U.S. tax official said on Monday.

The Internal Revenue Service recently set guidelines to lure individuals to voluntarily come forward by easing penalties, part of a crackdown on overseas tax evaders.

The program appears to be driving traffic into the agency, Internal Revenue Service Commissioner Doug Shulman told an audience at the National Press Club in Washington.

"We've had a real increase in voluntary compliance," Shulman said. "We're very focused on offshore tax evasion."

Those who take part are subject to fines, payment of back taxes and a 20 percent penalty, but are generally immune from criminal prosecution.

At the same time, the agency has a number of criminal prosecutions in the pipeline.

"We're going to keep opening them," said Shulman, who was appointed during the Bush Administration and has about four years left in a five-year term.

He called the international tax issue the agency's biggest challenge, especially in today's economic climate.

"There is little tolerance for those who have the means to pay their taxes, but shirk their responsibilities," he said.

Shulman talked up tax changes being pitched by President Barack Obama, including those in the $800 billion economic stimulus bill to help homeowners and students.

Obama has called for increasing capital gains taxes, limiting deductions for individuals who make more than $250,000 and closing loopholes on overseas profits.

On the corporate side, the agency is working with other countries to find companies that push the envelope to exploit loopholes to avoid taxes.

"We're going to be aggressive and if there is someone pushing the envelope, we're going to push back," he said.

Wednesday is the deadline for individuals to file tax returns in the United States, and the IRS expects to give out $300 billion in refunds this year.

Shulman noted that the Commerce Department has found a link between these refunds and a boost in retail sales.

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