The Internal Revenue Service is expanding its search for offshore tax evaders to Liechtenstein, a tiny European nation that borders Switzerland. The expansion is in line with the agency's recently announced goal of creating agreements with other countries that would require their governments to disclose foreign bank account information on U.S. taxpayers.
Liechtenstein and the U.S. have agreed that the latter government can request information on a narrow range of accounts. In particular, American taxpayers with an account at Liechtensteinische Landesbank AG whose assets exceeded a $500,000 threshold during the last eight years could have their data disclosed to the IRS. In addition, financial managers, accountants and others who worked with tax evading account holders could face penalties.
According to an attorney working in that country, requests for information on foreign account holders will likely become commonplace in Liechtenstein within a few years. The country has a reputation as a shelter for offshore accounts, and other governments have already pressured Liechtenstein to release data on their citizens' accounts to investigate potential tax evasion crimes.
U.S. taxpayers whose accounts are subject to the information disclosure agreement are not completely without recourse, however. Liechtenstein taxing authorities have communicated to account holders that they have a right to appeal the disclosure, although the procedures for an appeal were not elaborated upon.
One of the interesting questions about the examination of overseas tax evasion is where the IRS will look next. One Swiss lawyer suggested that Hong Kong, Dubai and Singapore could be potential targets. No matter where U.S. taxpayers hold their offshore assets, compliance with all regulations is of the utmost importance.
Source: Bloomberg, "Liechtenstein Informs Bank Clients of U.S. Tax-Evasion Request," Dylan Griffiths, June 10, 2012.