US to offer amnesty for Caribbean offshore accounts

WASHINGTON, CMC – The United States says it plans to announce a new amnesty programme aimed at encouraging wealthy Americans with hidden offshore bank accounts in the Caribbean to come forward, declare the funds and pay the necessary taxes.

Internal Revenue Service (IRS) spokesman Frank Keith said that the programme would be formally announced “very shortly” and would not offer terms as generous as those put forth in a similar initiative last year.

Senior tax lawyers say the announcement will most likely come within several weeks, ahead of the 2011 tax filing season.

“The government wants to encourage people not to lie on their upcoming returns,” said Robert Katzberg, a criminal defense lawyer in New York with offshore bank clients in the Caribbean and Switzerland.

The previous so-called voluntary disclosure programme, which ended last October, was carried out amid a crackdown on Swiss private banks and their clients who hid money from the government.

The programme was used by more than 15,000 Americans with hidden accounts, some holding hundreds of millions of dollars, the IRS said.

It said an additional 3,000 with accounts at various offshore banks, including the Cayman Islands, came forward after the October 15 deadline.

Some taxpayers disclosed their smaller accounts at UBS, the Swiss giant that was at the center of the crackdown, but did not disclose their larger accounts at smaller Swiss banks, Katzberg said.

He said that if caught, the omission could leave them exposed to criminal penalties for lying in addition to fines and penalties for taxes owed.

The US Justice Department said it is conducting a widening investigation into the smaller Swiss banks, known as cantonal banks that may have allowed wealthy Americans to evade taxes, sometimes working with larger banks based in Switzerland.

US prosecutors said they focused on a technique in which American clients were encouraged to open a small account and declare its contents to the IRS while keeping the bulk of their money elsewhere in undeclared accounts.

Steven Miller, the IRS deputy commissioner for service and enforcement, said that the new initiative would be “somewhat similar” to the October programme.

Under the previous program, taxpayers who came forward before October 15 were subject to a reduced penalty of 5 to 20 per cent, depending in part on whether their wealth was inherited.

They were also penalised just once, on the highest balance in their affected accounts over the previous six years, instead of for each of the six years, a level that can leave account holders owing more in taxes than they have in the account.