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Study Reveals Tax Evasion Investigation Strategies Have Been Ineffective


June 1, 2012
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A partnership between several tax agencies across the globe has sought to curb personal and corporate tax evasion strategies. However, the results of a new study reveal that global efforts have been largely ineffective. Data from the Bank of International Settlements shows that bank accounts in offshore tax havens held roughly $2.7 trillion in 2011, approximately the same amount they held in 2007 prior to new efforts to force compliance under tax law. Researchers say that international treaties, which have been signed by the United States and several European countries, have been futile because the business owners and wealthy individuals who utilize tax havens move their funds to locations that aren’t covered by the treaties. In addition, researchers say some weakly worded tax law treaties also make it easier for businesses and individuals to evade prosecution. Lastly, those who had access to the bank data report that corporate structures spanning multiple havens have also presented obstacles to tax authorities. For these reasons, the study’s authors say that efforts are likely to remain fruitless. “So far, the G20 tax haven crackdown has … largely failed … Treaties have led to a modest relocation of bank deposits between tax havens but have not triggered significant flows of funds out of tax havens,” concluded Niels Johannesen and Gabriel Zucman, who had access to the report data. Despite the results, the IRS has continued to step up its auditing efforts of small and large businesses in attempts to close the tax gap and curb tax evasion. A November report released by the Center for Tax Justice reveals that of the $3 trillion in tax losses that affect the global economy each year, the U.S. takes the largest financial hit.