On April 3, the International Consortium of Investigative Journalists (ICIJ) published what is now known around the world as the Panama Papers. These leaked documents – more than 11 million of them, comprising 2.6 terabytes of data – come from Mossack Fonseca, a top Panama law firm, and reveal secret offshore accounts and shell companies that notable players from around the world set up to obscure assets.
The documents point to world elites including politicians, athletes, and entertainers. One of the most noteworthy is roughly $2 billion in concealed offshore deals by people close to Russian President Vladimir Putin. The Panama Papers also point to offshore companies and deals involving former Icelandic Prime Minister Sigmundur Gunnlaugsson (who recently resigned over the scandal), the late father of British Prime Minister David Cameron, Chinese leader Xi Jinping, and international soccer players and officials.
American tax cheating
So far the leaked documents have implicated few Americans, but that could change. The ICIJ has spent the past year and a half combing through the documents and is not finished yet. According to one report, it has only reviewed the most recent years of data and has already identified over 200 people with U.S. addresses who own companies through Mossack Fonseca. There are also other international firms that Americans may have used to set up secret accounts outside of Panama that would be more attractive to someone looking to conceal wealth. A 2010 US-Panama trade-promotion agreement requires Panama to provide the U.S. with information that could relate to Americans banking or doing business there.
There will also be more plans for sharing international information next year introduced by the Organization for Economic Cooperation and Development (OECD). According to Pascal Saint-Amans, the director of the OECD Center for Tax Policy, its anti-tax evasion measures have helped about 20 governments collect roughly $50 billion in additional taxes over the past five years.
The Panama Papers scandal is incredibly large but it is not the first example of a foreign institution being implicated for its parts in international tax cheating. In 2014, the United States brought criminal charges against Credit Suisse, which pleaded guilty to aidingtax evasion. Credit Suisse ultimately paid $2.6 billion in penalties.
Duty to disclose foreign bank accounts
From a legal standpoint, any hidden foreign bank accounts or holding companies can put an American in the hot seat with the IRS. The law requires U.S. citizens to disclose foreign bank accounts and assets, as well as any income earned in or through a foreign country. Not doing so can subject an individual to both civil penalties and criminal charges. This is an area where ignorance of the law is no excuse; taxpayers have a duty to understand the tax liabilities they face with their offshore holding. If you have foreign income or accounts, consulting with a Maryland tax lawyer is a crucial step.
The Baltimore tax attorneys at Rosenberg Martin Greenberg have expertise in areas of taxation involving international matters. Our specialty is assisting taxpayers in finding their optimal resolution of tax issues. For a confidential review of your situation, please contact Brian J. Crepeau at 410-649-4981 firstname.lastname@example.org.