US taxpayers who have failed to declare their offshore money will lose the chance to confess to the Internal Revenue Service later this year.
The IRS has announced that the Overseas Voluntary Disclosure Program will close on September 28.
In the 10 years the OVDP has run, 56,000 taxpayers have owned up about their offshore finances and paid $11 billion into the coffers of the US Treasury.
But new international tax avoidance schemes like the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard have seen a network of tax data swapping between more than 100 countries.
In common with Britain and other leading financial centres, the US attitude to tax avoidance has hardened and many fail to see why diehard tax dodgers should get away with penalty discounts for hiding their money.
End of penalty discount
“It is no longer most economical for the US government to sit back and wait for people to feel scared enough or guilty enough to come forward and voluntarily correct their offshore tax and reporting errors,” said tax lawyers Shannon Smith Retzke and Hallie Aronsonof consultancy Withers LLP.
“It was previously the case that seeking out noncompliant US taxpayers with unreported offshore holdings was so difficult and costly that it made financial and logistical sense to offer a reduced penalty rate to people who came forward voluntarily, thereby saving the US government the resources of having to track them down.
“However, the IRS now believesthat it has the tools to root out offshore tax non-compliance with relative ease and minimal cost.”
The IRS suggests the numbers of people in the scheme reflect this.
Stopping tax evasion is IRS priority
In 2011, 18,000 taxpayers took part in OVDP. In 2017, the number was down to 600.
To take part in OVDP this year, full submissions must be with the IRS by September 28. Part or placeholder submissions will be rejected.
Ending the OVDPdoes not mean the IRS has softened attitudes towards tax avoidance.
“Stopping offshore tax noncompliance and evasion remain top priorities of the IRS,” said a spokesman.
“The IRS will leverage information using enhanced data analytics to continue making it more difficult to evade tax by hiding offshore.”