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GAO report reveals minnows paid penalties of as much as 129x tax owed in OVDP.

On Mar 27, 2013, the Government Accountability Office released a new Report to Congressional Requesters on “Offshore Tax Evasion”, which warns that the “IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion”. It provides more in-depth information about the characteristics of OVDP participants, and also reveals some details about the treatment of (and government attitude towards) people who make quiet disclosures.

For those U.S. Persons abroad too busy to read the GAO for seventy-two page report, Stephen Ohlemacher of the Associated Press has helpfully summerized the contents of the report.

Who were the actual OVDP participants?

The first question the report the report does not answer is how many of the OVDP participants were home-grown Whales, how many were immigrants and immigrants’ kids with money in the old country, and how many were emigrants or accidentals residing abroad for decades?

Well, the GAO report can’t tell. The word “offshore” appears on literally every single page of the report besides the back cover, the word “immigrant” is mentioned on precisely two pages, and “expatriate” and “abroad” appear zero times.

Statistics on minnows in the OVDP are lised on page 13 of the report, in the table “Selected Penalty Information for 2009 OVDP Individual Taxpayers with Closed Cases as of November 29, 2012″, which provides how much of the $5.5 billion collected by the OVDP consisted of actual tax owed, and how much was penalties?

The relevant portion of the table are reproduced here, with The Isaac Brock Society's added calculations of certain ratios (in italics) in the bottom two rows:

Median 75th
Offshore account(s) balance $78,315 $190,365 $568,735 $1,595,805 $4,054,505
2009 OVDP penalty $13,320 $35,670 $107,949 $310,476 $793,166
Additional tax owed, tax years 2003–2008 $103 $1,661 $12,748 $60,449 $190,399
Ratio of penalty to tax owed 129 21.4 8.46 5.13 4.17
Penalty as proportion of account balance 17.0% 18.7% 18.9% 19.4% 19.5%

Both the rich and the poor paid between a sixth and a fifth of their account balances as Offshore Penalties, not counting the extra tens of thousands of dollars of lawyers’ fees.

Thousands of middle-class immigrants and emigrants owed Uncle Sam less than three hundred dollars of back taxes per year, which resulted in the IRS putting them through a nightmare involving tens of thousands of dollars of penalties and lawyers fees, and threats of criminal charges and jail time if they dared to exercise their right to opt out.

The Isaac Brock Society


Read more at: Tax Times blog

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