Key lawmakers unveiled a bill Tuesday aiming to crack down on wealthy tax dodgers hiding money overseas.
The bill would impose new reporting requirements on foreign financial institutions doing business in the U.S., and on American advisers who help U.S. residents make investments overseas. Foreign firms that don't comply would be hit with a 30 percent withholding tax on income from their U.S. assets.
The bill, which would raise an estimated $8.5 billion over the next 10 years, was introduced by the top Democrats on the tax-writing committees in the House and Senate.
"This bill offers foreign banks a simple choice — if you wish to access our capital markets, you have to report on U.S. account holders," said Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee. The bill was also sponsored by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, among others. President Barack Obama praised the bill, which is similar to legislation he proposed this year.
Lawmakers have been working for years on proposals to stop tax cheats from hiding assets overseas. Sen. Carl Levin, D-Mich., who has worked on the issue, estimated the U.S. loses $100 billion a year in tax revenue because of international tax cheats.
Treasury Secretary Timothy Geithner said the bill adds to the administration's strategy of negotiating new agreements with other countries to share more financial information about U.S. account holders.
"For too long, individuals have taken advantage of the system by hiding money in accounts overseas, while millions of families and small businesses here at home pay the price," Geithner said in a statement. "This legislation will reduce the amount of taxes lost through the illegal use of hidden accounts and is the next step in making sure that everyone pays their fair share."
IRS Commissioner Doug Shulman said, "These efforts will give the IRS significant new tools to continue our expansion of international tax enforcement and make it even more difficult for U.S. citizens to avoid paying taxes by unlawfully hiding money overseas."
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Internal Revenue Service has been beefing up offices that track overseas investments, and Shulman recently announced that more than 7,500 people had come forward under an amnesty program that promised no jail time and reduced penalties for international tax cheats who turned themselves in.
Shulman is also setting up an IRS office to target wealthy tax cheats who use complex investment arrangements to hide money from the federal government. The Global High Wealth Industry group will focus on tax cheats with incomes or assets exceeding $10 million, Shulman said.
