In recent weeks, one of the most significant tax-related issues in the news has been the Panama Papers. This story revolves around the leak of offshore companies that were serviced by a Panamanian firm specializing in helping individuals and others set up tax havens.
So far, most of those implicated in the release of the papers have not been from the United States. There have been officials from many other countries identified by these papers. In Iceland, outrage over Prime Minister Sigmundur Gunnlaugsson’s undeclared offshore company resulted in his resignation.
Even though there have been speculations about who might have Panama Papers connections, there hasn’t been much movement on it in the United States — until now. Recently, prosecutors in the United States have announced that they have opened a criminal investigation related to matters of the Panama Papers.
Tax Dodgers from the United States?
Not all of those implicated in the Panama Papers scandal are doing so for tax reasons (some in the Middle East try to use offshore companies to avoid their businesses and property is subject to Sharia law), but the bulk of those who set up these offshore companies do so as a way to avoid taxes.
So far, criminal investigators haven’t said what types of infractions they are looking at, including whether or not they are tax-related. However, there is plenty of speculation that there is information regarding tax havens for U.S. business people, individuals, and companies contained in some of the leaked documents. It’s hard to tell right now because the leak was massive, with millions of documents being released. More details continue to come to light as those tasked with combing through the papers share their findings.
Offshore accounts and companies set up by way of Panama aren’t the only misdeeds under scrutiny right now. There has also been a lot of news surrounding the process of inversion, an idea that American companies can avoid some of their taxes. On top of that, the IRS has been cracking down on wealthy taxpayers who stash some of their money in offshore accounts or claim foreign income.
In a time where the budget is a big issue, looking for revenue is a primary activity for the government. Enforcement of the current tax code is a big part of making sure that the United States has a budget that allows it to continue to operate. So, even though budget cuts have impacted the IRS, there is still an effort to collect on unpaid taxes.
If wrongdoing can be found by U.S. investigators looking into the Panama Papers, there is a good chance that there will be some outrage. In a politically charged climate like an election year in the United States, this could become very important. Campaign issues this year in the United States revolve, in part, around who should be paying what, and the knowledge that some of the wealthiest individuals and companies might be using additional offshore methods to avoid paying taxes has many in the electorate upset and looking for a change.