Foreign tax havens targeted in U.S. bills

By Kevin Drawbaugh

WASHINGTON (Reuters) - Offshore tax havens used by rich Americans in Switzerland, the Cayman Islands and other nations are targeted for shutdown by bills offered on Monday by Democrats in both chambers of Congress.

The Senate bill expands on one co-sponsored last year by then-Senator Barack Obama and Senator Carl Levin, who has sought a broad crackdown on tax dodgers estimated to deprive the U.S. government of more than $100 billion a year.

A thriving business in tax evasion developed in recent years on Wall Street among consulting firms, hedge funds and other elite financial players. Some purveyors even sought patent protection for their off-the-shelf schemes.

The Levin bill would ban patenting of tax avoidance plans, target dozens of offshore "secrecy jurisdictions" for attention, and put a greater burden on taxpayers to show that their tax arrangements are legitimate.

"Offshore tax haven and tax shelter abuses are undermining the integrity of our tax system," said Levin, of Michigan, in a statement. "We cannot tolerate $100 billion in offshore tax abuses burning a hole through our budget each year.

"We can fight back against secrecy jurisdictions and shut down offshore tax abuses if we have the political will."

Three provisions have been added since last year to the Levin bill. One would classify U.S.-controlled foreign corporations as domestic for income tax purposes. Another would close an offshore tax dividend loophole that lets people dodge payment of U.S. taxes on U.S. stock dividends.

The third provision would expand tax reporting requirements for passive foreign investment corporations.