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Panama Papers Effect: IRS Cautions U.S. Citizens To Come Clean Or Face Consequences For Tax Evasion

By Alap Naik Desai
Published on: 09:35 PST, Apr 19, 2016

Americans whose names appear in the “Panama Papers” have been warned by IRS to come clean immediately, before the agency discovers any illegal activity.

The Internal Revenue Service has issued a strict advisory to any U.S. citizen, whose name might be mentioned in the leaked financial documents of Panamanian law firm Mossack Fonseca. The agency has cautioned anyone who might be implicated to come clean immediately before any possible illegal activity on their part is identified.

The warning may appear to indicate the IRS isn’t aware of any wrongdoing yet, but the leaked Panama Papers has information on thousands of offshore companies and has dirt on individuals across the world. Moreover, American citizens who are interested in protecting their money tend to prefer offshore havens in the Cayman Islands, Singapore, or Bermuda, reported Smart Brief. Nonetheless, more than 200 people with U.S. addresses have so far been identified by authorities combing the Mossack Fonseca documents, reported the Daily Mail.

As the IRS tries to figure out how it can use the leaked Panama Papers in its ongoing investigation centered on American individuals who might be guilty of U.S. tax avoidance, it has advised anyone using offshore accounts to contact them and share information before they are processed for committing tax fraud.

“People hiding assets offshore should recognize the continued changes and progress in the international tax arena. More than ever, their best option remains to come forward voluntarily and participate in the IRS Offshore Voluntary Disclosure Program.”

The IRS recently participated in two meetings about the Panama Papers. The agency hasn’t confirmed the details about any of the meetings. However, last week’s discussions held in Paris and Washington between IRS, U.S. Treasury officials, and their counterparts across the world are a clear indicator about the potential impact of the Panama Papers. Countries across the globe appear very interested to scrutinize the data and uncover tax fraud that could easily run into billions of dollars.

The IRS is working closely with Joint International Tax Shelter Information and Collaboration (JITSIC) network and Economic Co-Operation and Development (OECD). The entire congregation involves senior tax officials from more than 40 countries. Citing the sensitivity of the issue, the IRS did not reveal anything, but the OECD issued a statement noting that during the meetings, the officials discussed “opportunities for obtaining data, co-operation and information-sharing in light of the ‘Panama Papers’ revelations.” The IRS described the meetings as “productive and timely,” adding,

“We will be closely monitoring the situation along with our international tax administration partners as we determine what steps to take to ensure compliance with U.S. tax laws and meet our shared global interests.”

The Panama Papers is one of the largest collections of documents comprising highly sensitive and potentially devastating financial information about individuals and companies. Over 11.5 million documents were leaked to German newspaper Süddeutsche Zeitung and shared with International Consortium of Investigative Journalists (ICIJ) last month. The Panama Papers have laid bare the blatant tax fraud committed by not just a few wealthy individuals, but corrupt heads of state, celebrities, and criminals. Ill-gotten wealth is believed to have been carefully stashed away by many legal and financial counseling agencies like the Mossack Fonseca, claim experts. Detailed investigation of the documents may conclusively prove who has been laundering money either to evade taxes or hide other suspected criminal behavior.

Firms like Mossack Fonseca have strongly denied any wrongdoing. The agencies operational in regions like Panama insists they merely offer assistance to their clients to set up legal financial accounts. The agencies claim they operate within the purview of the existing rules and regulations, and do not condone or support the usage of these accounts for illegal activities, reported CNBC.

[Photo by Andrew Harrer / Bloomberg via Getty Images]

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