by Brian Mahany
Earlier this month the Organization for Economic Development and Cooperation (OECD) inked another agreement to insure that all nations work together to stop cross border tax evasion. Each year the OECD issues a report on what countries are cooperating and those that are not. Between the G20 group of developed nations and the OECD, there is growing pressure on governments to cooperate.
Switzerland alone is thought to hold $2 trillion in offshore money, much of that not taxed or even reported.
The OECD uses economic pressure to bring governments into compliance, Germany has been known to essentially steal or bribe information from foreign bank employees and the US indicts foreign bankers who help Americans evade taxes. The worldwide pressure on foreign banks and governments is intense.
According to the most recent survey, the OECD lists several countries that do not yet have effective tax exchange agreements in place. That list includes Antigua, Barbados, Botswana, Brunei, Estonia, Jamaica, Panama, the Seychelles, Switzerland, Trinidad and Vanuatu. Not all countries have been evaluated and just because a country does not have robust tax exchange agreements does not mean that it is a safe place to hide one’s money from Uncle Sam. Consider the record numbers of Americans with unreported Swiss accounts who have been prosecuted or audited within the last 12 months.
Of the countries who have been evaluated, North Korea and Brunei probably have the worst compliance record right now but they are not considered a safe banking destination. Remember, only 59 countries have been evaluated thus far. Some countries like Iran and Venezuela won’t cooperate and others like Syria and Nigeria haven’t been evaluated but are in such disarray that few people are flocking there with suitcases full of cash. The remaining countries are in the process of improving their compliance or promising to do so within a few years. Just look at Isle of Man which was once a popular hiding spot for money. While it still has excellent asset protection laws, the Manx government now has better transparency than the U.S. according to the OECD.
U.S. taxpayers – that includes dual nationals, foreign born Americans and U.S. green card holders – generally must report all foreign bank and brokerage accounts. Offshore accounts are reported annually on a Report of Foreign Bank and Financial Account (FBAR) filed with the IRS. Foreign income from dividends, interest and capital gains must be reported on one’s tax return.
Most people who have failed to file FBARs do so because they simply do not understand the reporting requirements. Intentional violators are subject to criminal prosecution. But even “innocent” non-filers are subject to huge penalties.
If you have unreported foreign accounts or income, contact a tax attorney. Time is not on your side, even if you have an account in one of the countries listed above. The IRS maintains a voluntary disclosure initiative to allow taxpayers to come into compliance without the fear of prosecution.
For a confidential, no cost consultation, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & San Francisco, California. Tax services available in all jurisdictions.