Tax havens in U.S. cross hairs
With $345 billion in lost revenue, tolerance for off-shore avoidance fades.
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In Washington, the IRS stated in February that it is "initiating enforcement action" against the 100. It said "combating off-shore tax avoidance and evasion are high priorities." But so far, no further word on the action has emerged.Skip to next paragraph
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The Bush administration, in Ms. Komisar's view, has been inadequate in tackling tax-haven losses. While Senator McCain hasn't talked about tax havens on the campaign trail, Obama has frequently referred to Ugland House in Grand Cayman, a building that houses thousands of tax haven corporations, as "the biggest tax scam on record."
Komisar is hopeful that Obama will push for the Levin bill, if elected. Maybe closing or limiting tax havens is "an idea whose time has come," she says.
Mr. Sullivan sees greater efforts to close tax havens as a "twofer." It would raise substantial revenues. It also would trim the growing income gap in the United States between the wealthy and the middle and lower classes, since the wealthy are more likely to use tax havens than those with less income.
An IRS report obtained by the Wall Street Journal in March indicated that the nation's top 400 income-tax payers (with at least $100.3 billion in adjusted gross income) controlled 1.15 percent of the nation's total income in 2005 – twice the share they controlled in 1995. Over that same period, the average effective income tax rate paid by this same group fell from 30 percent to 18 percent. The Bush tax cuts aided this shift. Also, there is a suspicion that the use of tax havens has increased. Money transfers can be done electronically and easily with the help of a bank. It is no longer necessary to cart bushels of money in a briefcase to some remote island.
Joel Slemrod, a tax economist at the University of Michigan Business School, Ann Arbor, sees tax havens as "clearly a bad thing." They enable many small island nations to "commercialize" their sovereignty at the expense of mostly industrial nations, he says. Tax havens have given tiny nations a lucrative job-creating business. The Cayman Islands, for instance, has 5,400 financial-services employees.
[Editor's note: The original version misspelled Ms. Komisar's name.]