Outspoken U.S. tax cop hits offshore cheats

WASHINGTON (Reuters) - In his last job, U.S. tax commissioner Douglas Shulman rubbed elbows with brokerage firms as he worked at an industry regulator criticized for having a light touch on Wall Street.

Now, he is the outspoken chief of the US. Internal Revenue Service which has taken on Swiss banking giant UBS AG, forcing it to reveal thousands of names of rich American clients hiding assets overseas.

Shulman, 42, was appointed by former President George W. Bush in 2008, and is given high marks by many IRS watchers.

Supporters say tougher enforcement is long overdue, given an estimated $100 billion that goes uncollected in taxes annually due to offshore tax evasion, and could help plug the government's widening budget deficit.

While the crackdown on offshore tax evasion began before Shulman arrived, many say they have not heard an IRS commissioner speak so forcefully in years.

"If you compare his statements on going after tax cheats, they are much stronger than previous commissioners," said Joann Weiner, a former economist in the Treasury Department's tax analysis office during the Clinton administration.

A decade ago, the IRS was criticized for being too aggressive toward individuals and small businesses, now it is warning rich taxpayers and corporations that their tax-evading techniques are under a microscope.

"Now, you have Mr. Shulman who says, 'I am going to try a different tack,' and it's heavy on enforcement, especially the international aspect," said Russell George, the Treasury Department's inspector general for tax issues.

Thursday is the deadline for an IRS amnesty program offering lighter penalties for tax evaders who voluntarily declare untaxed offshore assets. It lured in 7,500 Americans who had previously not declared assets.

"It's about sending a signal to people that we are going to be much more focused," Shulman said in a recent interview at his modestly decorated office in IRS headquarters. "We are going to have breakthroughs that you haven't had in the past."

ENFORCEMENT ZEAL

But some worry the IRS is being too aggressive, with negative consequences for the financial sector.

"There is already a chilling effect on international banking," said Pete Sepp, a spokesman for the National Taxpayers Union, a conservative group that advocates lower taxes.

And several members of Congress have complained that the IRS is not doing enough for small and medium size business.

"I think the big concern that I am seeing out there is in the zeal to kind of collect revenues," said Dean Zerbe, a former tax counsel for the Senate Finance Committee who now represents small and medium sized businesses on tax issues.

Shulman, like his recent predecessors, had a limited tax background before heading the IRS. He has a masters in public administration from Harvard and law degree from Georgetown University,

He did spent a year in 1997 as a staff member to the National Commission on Restructuring the IRS, a panel created by Congress that led to a private oversight board to advise the IRS on operating matters.

OFFSHORE FOCUS

Shulman oversees 100,000 employees responsible for collecting $2.4 trillion that fund most government operations.

"Every single adult American, every business, every nonprofit interacts with us each and every year," he said.

Well, maybe not every American.

The center of the government's crackdown on offshore tax cheats has been its legal cases against UBS, which has paid $780 million and agreed to hand over about 5,000 client names to settle charges against it, admitting it actively helped Americans evade taxes.

Shulman says the UBS case should serve as a warning to investors and their bankers, and has made pursuit of them a high-profile issue with backing from the Obama administration.

"There has been a huge push to go after the tax cheats but the IRS was never given resources or support," said Weiner, the former Treasury tax official. Shulman "now has the support to say: 'find us before we find you'."

His vigilant stance toward offshore tax cheats comes after seven years as vice chairman for strategy and operations at the Financial Industry Regulatory Authority and a similar role at its predecessor, the National Association of Securities Dealers.

Critics say FINRA is not especially aggressive and sometimes too cozy with the securities industry it regulates.

An internal FINRA report, for example, recently faulted the group for missing clues that could have uncovered Bernard Madoff's $65 billion fraud earlier.

Shulman's focus on wealthy tax cheats and their advisers has fended off any suggestion he might be soft on tax evaders.

Offshore tax evasion "has long been an issue for the IRS," said Robert Tobias, a former Treasury Department union official who now sits on the IRS Oversight board. "But the IRS hasn't had the focus it has under Shulman."

(Reporting by Kim Dixon; Editing by Tim Dobbyn)