In early August, United States Senator Norm Coleman, (R - Minn) and his subcommittee held another one of their orchestrated anti-offshore hearings, complete with pre-hearing horror stories in The Wall Street Journal and The New York Times. The subcommittee’s presumed-guilty indictment was billed as “Tax Havens and Offshore Abuses.”
This Senate circus, with 14 witnesses capped off a year-long investigation that cost millions of taxpayer dollars, claims to have served 70 subpoenas, reviewed over 2 million pages of documents and produced a 401 page report written by the committee of Sen. Carl Levin (D-MI), the fanatic leader of the anti-offshore band.
Amazingly, they even went so far as to advocate curtailing centuries old legal rights to create and operate freely offshore trusts, corporations, and other entities traditionally used to protect assets. Ignoring the U.S. Constitution and the presumption of innocence, the senators suggested that any American with offshore financial activities should be forced to prove their actions do not involve illegal tax evasion.
Millions of Americans enjoy the fully legal freedom of offshore financial activity. Nevertheless, based on a few selected cases, subcommittee chairman, Sen. Coleman, surrendered the show to his liberal Democrat cohort, Sen. Levin, who made the startling, illogical charge that an alleged US$40 to US$70 billion in U.S. taxes is being illegally evaded each year by Americans’ use of offshore financial activity. The senators offered zero proof of such wild numbers, and even IRS Commissioner Mark Everson, who testified, did not endorse these senatorial fantasies.
In their rush to prove their unsubstantiated ramblings, they ignorantly summoned leading offshore tax and estate planning attorney, Michael Chatzky JD to testify. These misguided senators wanted Mr. Chatzky to prove their theory that individuals keep their offshore trust reporting secret. Instead, this longtime member of our Council of Experts just made them look foolish. Mr. Chatzky started explaining exactly how offshore tax reporting laws really work, commenting that individuals must report their offshore trusts to the IRS by U.S. law. Once he explained, the senators lost interest, since the truth did not fit their preconceived, anti-offshore notions.
Now, nearly two months later, it seems this entire attack on offshore dealings has fizzled. The media has mostly stopped discussing this phony attack. And it seems this Capitol Hill dog and pony show was another calculated tax attack on middle class and wealthy taxpayers who honestly are trying to reduce their liability and protect their wealth by using legal offshore means.
Bottom line: Coleman-Levin and their IRS buddies just wanted to scare all Americans into believing that going offshore is illegal—when it is fully legal, so long as you report your activities and pay your taxes on all worldwide income, (and we repeatedly tell you how to do that). And in short, they didn’t succeed. We’re not sorry, Senators.
Robert Bauman is Legal Counsel for The Sovereign Society and editor of The Sovereign Society Offshore A-Letter. A former member of the U.S. House of Representatives from Maryland, he is a graduate of the Georgetown University Law Center (1964) and the School of Foreign Service (1959).