California residents may have read about the Internal Revenue's Service's dogged pursuit of Americans who may have attempted to evade taxes by placing assets in Swiss banks. It now appears that the government is expanding its scrutiny of offshore accounts beyond Switzerland's borders. Under an agreement with neighboring Liechtenstein, that country's oldest bank must now disclose account information on certain Americans to U.S. authorities.
Taxpayers affected by the information request are those who held $500,000 or more--even momentarily--in an account at Landesbank AG since 2004. The country's taxing body has indicated in letters sent to taxpayers that they can appeal the turning over of their account information.
The U.S. is not the only country to go after its own citizens who placed assets in Liechtenstein's banks. The United Kingdom, France and Germany have all received concessions from the small nation on tax avoidance issues. According to a lawyer in the country, the information request negotiated by the U.S. will become commonplace in Liechtenstein within a matter of years.
The IRS has been investigating potential instances of tax evasion in Switzerland for the past few years. But the gradual expansion of its inquiry into offshore tax evasion is likely to continue in other jurisdictions. One Swiss lawyer believes that the U.S. may go after Hong Kong, Dubai and Singapore next.
While keeping assets overseas is legal, the government imposes increasingly detailed reporting requirements on those with offshore accounts. Failure to comply with applicable laws can subject taxpayers to substantial financial penalties as well as potential jail time.
Source: Bloomberg Businessweek, "Liechtenstein Informs Bank Clients of U.S. Tax-Evasion Request," Dylan Griffiths, June 10, 2012.