Friday, January 23, 2015


This is the fundamental reason that Puerto Rico is still not a State of the Union. Everytime a process for self determination begins in Congress, these Tax Evaders use their unending economic resources to lobby Washington to keep Puerto Rico as a tax haven to continue their enormous profits.
We, the people of Puerto Rico lack the economic resources or political power to overcome their influence to use us as a tax haven, all at the expense of our US Citizen rights to vote for the president, or have representation in the US Congress !!! 

Tax Havens: International Tax Avoidance and Evasion 
Jane G. Gravelle Senior Specialist in Economic Policy 
January 15, 2015 

Multinational firms can artificially shift profits from high-tax to low-tax jurisdictions using a variety of techniques, such as shifting debt to high-tax jurisdictions. Because tax on the income of foreign subsidiaries (except for certain passive income) is deferred until income is repatriated (paid to the U.S. parent as a dividend), this income can avoid current U.S. taxes, perhaps indefinitely. The taxation of passive income (called Subpart F income) has been reduced, perhaps significantly, through the use of hybrid entities that are treated differently in different jurisdictions. The use of hybrid entities was greatly expanded by a new regulation (termed checkthe-box) introduced in the late 1990s that had unintended consequences for foreign firms. 

In addition, earnings from income that is taxed often can be shielded by foreign tax credits on other income. On average, very little tax is paid on the foreign source income of U.S. firms. Ample evidence of a significant amount of profit shifting exists, but the revenue cost estimates vary substantially. Evidence also indicates a significant increase in corporate profit shifting over the past several years. Recent estimates suggest losses that may approach, or even exceed, $100 billion per year. Individuals can evade taxes on passive income, such as interest, dividends, and capital gains, by not reporting income earned abroad. 

In addition, because interest paid to foreign recipients is not taxed, individuals can evade taxes on U.S. source income by setting up shell corporations and trusts in foreign haven countries to channel funds into foreign jurisdictions. There is no general third-party reporting of income as is the case for ordinary passive income earned domestically; the Internal Revenue Service (IRS) relies on qualified intermediaries (QIs). In the past, these institutions certified nationality without revealing the beneficial owners. Estimates of the cost of individual evasion have ranged from $40 billion to $70 billion. 

The Foreign Account Tax Compliance Act (FATCA; included in the HIRE Act, P.L. 111-147) introduced required information reporting by foreign financial intermediaries and withholding of tax if information is not provided. These provisions became effective only recently, and their consequences are not yet known."



MORE: CRS Report: Tax Evasion, Avoidance Costs United States $100 Billion A Year

BY: Adam Kredo
January 23, 2015 5:00 am

Companies and U.S. citizens shifting profits and income offshore are bilking the U.S. government out of $100 billion in tax revenue a year, according to a new analysis by a congressional research group. Those using offshore tax havens to skirt paying taxes cost the U.S. government “around $100 billion per year,” according to the Congressional Research Service (CRS), which examined in a new report the many ways in which people cheat the government. “This activity appears to have increased substantially in recent years,” the report notes.

“The federal government loses both individual and corporate income tax revenue from the shifting of profits and income into low-tax countries,” researchers found. “The revenue losses from this tax avoidance and evasion are difficult to estimate, but some have suggested that the annual cost of offshore tax abuses may be around $100 billion per year.”

When it comes to individuals, a large portion of the tax evasion occurs when they take actions to move their investments to foreign companies and then “do not report the holdings of these assets on their tax returns,” according to the CRS. When a person does this, “they evade a tax that they are legally required to pay,” according to CRS.

However, in some cases, even the experts at the CRS are not quite clear on the law. “Tax avoidance is sometimes used to refer to a legal reduction in taxes, whereas evasion refers to tax reductions that are illegal,” it writes. “Both types are discussed in this report, although the dividing line is not entirely clear.”

For instance, “a multinational firm that constructs a factory in a low-tax jurisdiction rather than in the United States to take advantage of low foreign corporate tax rates is engaged in avoidance, whereas a U.S. citizen who sets up a secret bank account in the Caribbean and does not report the interest income is engaged in evasion,” the report states. Still, there are “many activities, particularly by corporations, that are often referred to as avoidance but could be classified as evasion,” according to CRS.

The U.S. government has tried to crackdown in individual tax avoidance by increasing tax-reporting burdens.
“Provisions to address individual evasion include increased information reporting and provisions to increase enforcement, such as shifting the burden of proof to the taxpayer, increased penalties, and increased resources,” the report states.