Mark Matthews Comments on International Tax and Financial Regulatory Agenda

During The Society of Trust and Estate Practitioners' (STEP) first global congress, Caplin & Drysdale's Mark E. Matthews commented on international data collection and how the IRS will use that data. For the complete article, please visit Worldwide Tax Daily's website (subscription required).

Excerpt taken from the article "STEP Forum Focuses on International Tax and Financial Regulatory Agenda"  by Bruce Zagaris for Worldwide Tax Daily .

International Data Collection

Mark Matthews of Caplin & Drysdale in Washington said that IRS resources are widely misaligned. The average small business is reporting only 5[2] percent of its income. The level of noncompliance by applicants for the offshore voluntary compliance programs is much lower than that by small business. The IRS is down 13,000 enforcement people just as it has been allocated the responsibility of enforcing the Affordable Care Act. The ability of the IRS to accept and use data is challenging in the short term. It receives data from multiple sources: the Schedule B on the 1040, FBARs, 8938 reports, the offshore voluntary disclosure program, and FATCA. Information through the latter will go into automatic underreporting data. Some taxpayers will receive letters from the IRS. Some taxpayers will receive audits, and others will encounter criminal enforcement.

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Government Use of Data

Matthews said that the IRS is obtaining information from multiple data and will use it civilly and criminally. The IRS is especially interested in penalties and has created a generation of agents focused primarily on generating penalties. When the data lead to criminal investigations, taxpayers should be worried. The Swiss leaver lists, a requirement of the U.S. DOJ voluntary disclosure program for Swiss banks, help. Neither the number of prosecutions nor the average amount of the bank accounts in criminal prosecutions has been high. Two-thirds of persons convicted have received sentences of probation. The DOJ track record shows poor case selection. In November Raoul Weil, former head of private wealth, UBS, was acquitted after a three-week trial. The IRS has said that there will be another John Doe summons proceeding in a country other than Switzerland. There is likely to be much more data collection in the future.