Five Countries’ Tax Offices Join Forces to Fight Financial Crime

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By Siri Bulusu

Tax authorities from the U.S., the U.K., Canada, Australia, and the Netherlands have created an international enforcement group to fight crime and speed up responses to financial data dumps like the Panama Papers.

The formation of the group comes after the Organization for Economic Cooperation and Development’s call for countries to share technology and data to crack down on criminals and get ahead of cyber crime. The group, the Joint Chiefs of Global Tax Enforcement, was announced June 28 in a press call.

The group will share data, intelligence, technology and methods, “pilot new initiatives,” and conduct joint operations to “bring those who enable and facilitate offshore tax crime to account,” according to a June 28 statement from the IRS.

The officials recently met in Montreal to share information about each country’s national laws and to improve their ability to identify offshore financial structures used to evade taxes.

Two high-profile leaks of data in recent years, the Panama Papers and Paradise Papers, put the spotlight on the ways individuals and companies evade tax and stash profits offshore. An investigative committee in the European Parliament will scrutinize the information in the Paradise Papers for the next year.

Don Fort, chief of the Criminal Investigation division at the Internal Revenue Service, declined to comment on the leaks specifically. But he said that in the future, the group will be “mapping out strategies to make sure next time there is an available source of information to each of us.”

Cryptocurrency Focus

The use of cryptocurrency for illicit financing and drug trafficking is one focus for the group.

“We spent a lot of time talking about the threat our tax administrations face with the use of cryptocurrencies and speaking from a U.S. perspective, obviously there is the potential for untaxed gains in the U.S.,” Fort said.

Simon York, the director of the Fraud Investigation Service at Her Majesty’s Revenue and Customs, the U.K. tax authority, said his department has increasingly noticed criminals using cryptocurrency to “fragment” illegal activity across the globe.

Tax authorities are “trying to turn the table” and show criminals that fragmenting illegal activity still means they could be taxed wherever they operate, York said.

Data Sharing

Fort said the group has spent a lot of time talking about the best ways to share information, since each country has “incredibly rich sources of data” and different disclosure rules governing it.

The officials on the call didn’t specify how the tax data would be shared, or what measures were being taken to guarantee the security of sensitive financial information.

“It is still the early stages of this effort and we are recognizing the challenges and bringing in experts from each country to tackle these problems,” Fort said.

With assistance from Lynnley Browning (Bloomberg).

To contact the reporter on this story: Siri Bulusu in Chicago at correspondents@bloomberglaw.com

To contact the editor on this story: Penny Sukhraj at psukhraj@bloombergtax.com

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