U.S., UK and Australian Tax Authorities Uncover Information on Offshore Tax Evaders and Advisors


The Internal Revenue Service is teaming up with tax authorities in the United Kingdom and Australia to battle offshore tax havens after uncovering new information on specific taxpayers and advisors.

The tax administrations from the U.S., Australia and the U.K. announced a plan Thursday to share tax information involving trusts and companies that hold assets on behalf of residents in jurisdictions throughout the world. The IRS said the three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands.

The data they have acquired purportedly contains both the identities of the individual owners of these entities, along with the advisors who assisted in establishing the entity structure.

The IRS said it has been working together with the Australian Tax Office and the U.K.’s HM Revenue & Customs to analyze the data they have acquired and have already uncovered information that may be relevant to the tax administrations of other jurisdictions. The IRS said they have also developed a plan for sharing the data, along with their preliminary analysis, if requested by those other tax administrations.

“This is part of a wider effort by the IRS and other tax administrations to pursue international tax evasion,” said IRS Acting Commissioner Steven T. Miller in a statement. “Our cooperative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes.”

While there is nothing illegal about holding assets through offshore entities, such offshore arrangements are often used to avoid or evade tax liabilities on income represented by the principal or on the income generated by the underlying assets, the IRS pointed out. In addition, advisors may be subject to civil penalties or criminal prosecution for promoting such arrangements as a means to avoid or evade tax liability or circumvent information reporting requirements.

The IRS expects the multilateral cooperation and coordinated effort of the tax authorities will allow many countries to efficiently process this information and effectively enforce any laws that may have been broken.  Increasingly, tax administrations are working together in this way to assist one another in identifying non-compliance with the tax laws.

The IRS is encouraging U.S. taxpayers holding assets through offshore entities to review their tax obligations with respect to these holdings, seek professional advice if necessary, and to participate in the IRS Offshore Voluntary Disclosure Program where appropriate. Failure to do so may result in significant penalties and possibly criminal prosecution, the IRS warned.

Last month, a group known as the International Consortium of Investigative Journalists, reported that they had uncovered a large cache of secret documents revealing that tens of thousands of people, including government officials from around the world, are using offshore companies and trusts to avoid taxes (see Documents Shed Light on Wide Use of Tax Havens).

On Thursday, the ICIJ said it believes the secret records described by the IRS are believed to include those it obtained. It noted that British tax authorities claim they have even more data than that unearthed by ICIJ. The total size of the ICIJ files, measured in gigabytes, is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010.

A statement from the British tax office puts the size of the data obtained by the three tax authorities at 400 gigabytes, compared to the 260 gigabytes gathered by the ICIJ.

“The 400 gigabytes of data is still being analyzed but early results show the use of companies and trusts in a number of territories around the world including Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands,” the British tax office statement said. “The data also exposes information that may be shared with other tax administrations as part of the global fight against tax evasion.”

Last month, the ICIJ and 37 media partners began reporting on more than 2.5 million files that include the names of thousands of American, Australian and British citizens as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

The files leaked to ICIJ provide facts and figures—cash transfers, incorporation dates, links between companies and individuals—that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike. The records detail the offshore holdings of people and companies in more than 170 countries and territories.

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