Commissioner's Swan Song - Excerpts on Offshore Bank Initiatives (11/8/12)

Doug Shulman, the outgoing Commissioner of Internal Revenue and principal public promoter of the IRS's and DOJ's offshore account initiatives, issued these prepared remarks before the AICPA in Washington, D.C., here.  He recounts his major initiatives, and includes the offshore accounts initiative at the top of the list.  I excerpt only the portion related to offshore accounts.

Today, I want to share with you some of the results of almost five years of relentless focus on a handful of strategic priorities we set for the IRS. The priorities are: 

•  Creating breakthrough strategies to combat international tax evasion; 

* * * * 

So, let me begin with our efforts on the international front.  Both corporations and individuals operate in the global economy, as corporations seek out new markets and individuals have global exposure through their investments, including retirement accounts. 

Yet, this fundamental shift to a more global economy has created a real set of compliance challenges for the IRS. On the individual front, we have made putting a big dent in offshore tax evasion a major priority. 

We view offshore tax evasion as an issue of fundamental fairness. Wealthy people who unlawfully hide their money offshore aren’t paying the taxes they owe, while schoolteachers, firefighters and other ordinary citizens who play by the rules are forced to pick up the slack and foot the bill.

Over the past five years, we have significantly increased our resources and focus on offshore tax evasion, and the results have been substantial. We upped the ante in a meaningful way with our work on Swiss financial institutions – where for the first time in history, a bank secrecy jurisdiction turned over thousands of names and account numbers. 

As we increased our enforcement efforts and gained significant momentum, we gave taxpayers a chance to come in voluntarily and avoid going to jail. In a typical year, we used to get 100 or so taxpayers who used our voluntary disclosure program. When we first set up our new program in 2009, we thought that figure would rise to maybe 1,000. 

So we are very pleased that we’ve had approximately 38,000 voluntary disclosures from individuals who came in under the special programs.  

To date, these individuals have paid back taxes and stiff penalties amounting to more than $5.5 billion, and the number continues to grow. We are mining the information we have received and have launched our next wave of investigations on banks, bankers, intermediaries and taxpayers. 

Collecting additional revenue for past misdeeds – as important as that may be – is not the only, or even primary, consideration here. It’s perhaps more important that we’re bringing U.S. taxpayers back into the system…back into compliance… so they properly report and pay their taxes for years to come. We have fundamentally changed the risk calculus of taxpayers who are thinking about hiding their money overseas, and we are well on our way to deterring the next generation of taxpayers from using hidden bank accounts to cheat on their taxes.