Targeting Tax Evasion by Targeting Tax Havens

Last updated on November 11, 2022

To target tax evasion, the IRS has targeted tax havens on one hand and encouraged voluntary disclosure of evaded taxes on the other. Switzerland, a country well-known for allowing secrecy in financial institutions, was asked by the IRS under Foreign Account Tax Compliance Act (FATCA)  to share financial details of U.S. taxpayers and introduce transparency in financial operations with U.S. taxpayers in the future.

In August of this year, the IRS introduced a new online registration system for financial institutions to register with the IRS under FATCA. The registration system is available around-the-clock. This new IRS facility allows financial institutions to:

• Establish online accounts
• Customize home pages to manage accounts
• Designate points of contact to handle registrations
• Oversee member and/or branch information
• Receive automatic notifications of status changes

The IRS is making arrangements to sign agreements under FATCA with many countries, which will help the Treasury gain billions of dollars of tax revenue each year that was previously lost in tax evasion. Curbing tax evasion by targeting tax havens is more manageable than scanning every individual taxpayer. To help tax evaders get back into compliance, the IRS is also running Offshore Voluntary Disclosure Program (OVDP).

FATCA along with OVDP will help the U.S. bring down tax evasion substantially. It will also deter taxpayers from evading taxes by using tax havens.