US Senate gives Treasury a new anti-tax-haven weapon in its arsenal

You could be forgiven for thinking that tax havens and highway transportation don’t have much in common, but it seems you would be wrong.  Senator Carl Levin has linked the two in his latest campaign against tax havens, by putting forward an amendment to a US surface transportation bill which would give the US a powerful new weapon in its anti-tax-haven arsenal.

Yesterday the US Senate adopted an amendment to the bill which gives the US Treasury more power to combat tax evasion enabled by foreign governments or financial institutions, and could potentially lock some foreign governments and non-US financial institutions out of doing business in the territory altogether. In particular, the Treasury could prohibit US banks from accepting wire transfers or honouring credit cards from banks found to significantly hamper US tax enforcement efforts.

Although the amendment is doubtless a move which will offer Senator Levin the opportunity for some good sound bites about clamping down on tax dodgers, the move will not be welcomed by the US financial institutions, who are already struggling to digest the significant new bureaucracy which they will face when the 400 pages of new regulations come into force under the Foreign Account Tax Compliance Act (FATCA) in January 2014.  There is a growing feeling that whilst preventing tax evasion is a laudable aim, the methods being used by Levin and his supporters are placing an intolerable burden on US and foreign financial institutions, and that the US is becoming a jurisdiction with which some organisations are simply deciding to avoid dealing.

A final vote on the measure is expected on 13^th March. Then it will go to the Republican controlled House of Representatives, where it is likely to face more opposition.