A handful of Senate Democrats introduced legislation Tuesday to target U.S. assets held overseas, a move they believe could raise $100 billion in tax revenues and could be included in a possible deal to raise the nation's debt ceiling.
The bill would allow the U.S. to more aggressively attack foreign banks that fail to report accounts held by U.S. citizens for tax purposes, as well as U.S. citizens deemed to be evading U.S. taxes through these offshore accounts.
"The bottom line is that each of us has a legal and civil obligation to pay taxes, and most Americans fulfill that obligation," he said. "It is time to force the tax scofflaws, the tax dodgers and the tax cheats to do the same, and end their misuse of offshore tax havens."
The bill follows last year's passage of the Foreign Account Tax Compliance Act (FATCA). That act is aimed at increasing transparency of U.S. assets held overseas, thus increasing government tax revenues.
But Levin and other Democratic co-sponsors of the new bill, S. 1346, argue that resistance to FATCA by foreign banks and U.S. citizens requires even tougher enforcement measures. Non-U.S. banks such as Barclays, Credit Suisee and TD Bank are known to be lobbying for a softer implementation of FATCA, which takes effect in 2013.
To fight non-compliance with FATCA, Levin's new bill would give Treasury new authority — similar to what it has in the Patriot Act to fight money laundering — to crack down on foreign banks that do not disclose U.S. accounts. Specifically, Treasury would be permitted to determine which foreign banks are "impeding U.S. tax enforcement," and then be allowed to take steps against those banks.
"Treasury could, for example, in consultation with the IRS, the secretary of State and the attorney general, require U.S. financial institutions that have correspondent accounts for a designated foreign bank to produce information on all of that foreign bank's customers," Levin said in explaining his bill. He also said Treasury could prohibit U.S. banks from opening accounts for designated foreign banks.
"If some foreign financial institutions decide not to participate in the FATCA system, that's their business," Levin added. "But if U.S. taxpayers start using those same foreign financial institutions to hide assets and evade U.S. taxes to the tune of $100 billion per year, that's our business."
The bill makes several other changes aimed at making it easier for the government to establish that offshore funds are controlled by U.S. citizens and need to be taxed, and seeks to crack down on offshore companies that operate and are controlled in the United States. Under the bill, those companies that are publicly traded, have gross assets of $50 million or more and are managed and controlled within the U.S. would be treated as U.S. companies for tax purposes, regardless of where they are incorporated.