International Tax Enforcement: The Joint Chiefs of Global Tax Enforcement

In FATCA, International Tax by Jason FreemanLeave a Comment

Earlier this year, the IRS launched and joined the Joint Chiefs of Global Tax Enforcement, known as the “J5,” in an effort to crack down on international tax fraud, money laundering, and cryptocurrency-related crimes. The J5 includes agencies from the United Kingdom, Canada, Australia, and the Netherlands, along with the IRS. The initiative involves a stated effort to share information and conduct joint investigations in order to “reduce the growing threat posed to tax administrations by cryptocurrencies and cybercrime.”
The J5 was formed in response to the Organization for Economic Co-Operation and Development’s (OECD) request for an international effort to curb tax crimes. The J5’s mission statement provides that it was formed “in response to the OECD’s call for countries to do more to tackle the enablers of tax crime.”  The J5 is somewhat similar to the Joint International Tax-Sheltered Information and Collaboration(JITSIC), which was established by 38 countries and is open to all members of the OECD’s forum on tax administration (FTA).

The IRS previously elaborated on the perceived need for the new effort, clearly identifying its belief that offshore structures and cryptocurrencies pose a significant threat to tax administration:

We are convinced that offshore structures and financial instruments, where used to commit tax crime and money laundering, are detrimental to the economic, fiscal, and social interests of our countries. We will work together to investigate those who enable transnational  tax crime and money laundering and those who benefit from it. We will also collaborate internationally to reduce the growing threat to tax administrations posed by cryptocurrencies and cybercrime and to make the most of data and technology.

See the release here.

According to Don Fort, Chief of IRS-CI, the IRS “cannot continue to operate in the same ways we have in the past, siloing our information from the rest of the world while organized criminals and tax cheats manipulate the system and exploit vulnerabilities for their personal gain. The J5 aims to break down those walls, build on individual best practices, and become an operational group that is forward-thinking and can pressurize the global criminal community in ways we could not achieve on our own.”

Notably, the IRS entered the new initiative as it wound down its Offshore Voluntary Disclosure Program, as well as its Swiss Bank Program.  It is an outgrowth of those efforts, and is designed to build upon the enormous amounts of data that countries such as the United States have obtained over the past decade.  Notably, the J5 initiative underscores a new focus on cryptocurrency-related tax evasion.  It also indicates that the IRS and other tax enforcement agencies across the globe are likely to utilize the lessons learned in recent years in the battle to curb international tax evasion.

All signs indicate that the IRS will continue to very aggressively pursue offshore accounts as it pushes forward into a new era of information sharing. Those signs are reinforced by a number of recent prosecutions, including of a former bank executive for failing to comply with the Foreign Account tax Compliance Act (release here), a California man who failed to report funds held in an Israeli offshore account (release here), and a taxpayer who made false representations during an IRS audit that ultimately uncovered an unreported account (release here).  Expect to see more prosecutions in the months ahead related to claims of international tax evasion.

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