Many of you have been perhaps curious as to why American based Pfizer Inc. is paying $100 billion to buy British rival AstraZeneca. Would you believe to save billions in taxes over many years to come? Yes, Pfizer, Brooklyn born and raised, the 165 year old maker of Lipitor, which by the way makes a ton of money off Medicaid and Medicare each year, somehow feels a patriotic duty to abandon the United States through what is called in “inversion” to legally house itself in another country. While the deal is far from done I believe there is something really creepy about a company that makes a ton of money off government programs that are funded with the very taxes that Pfizer is trying to avoid.
There’s more. America is not only being abandoned by big business but turns out now that the IRS believes that many of the 1% are moving money offshore You know the 1% of American taxpayers that supposedly support the rest of us? It is rumored that some of these taxpayers have not been paying their fair share of income tax on the earnings in foreign bank accounts like interest dividends, capital gains, royalties etc. Actually there are some who have never even paid tax on the principal generating these earnings. How easy is this to do? Since 1099s are not issued by foreign banks to American account holders it is very easy indeed for these taxpayers to give all their documentation to their CPA and get their taxes filed each year without ever paying a dime of tax on their foreign earnings.
How serious is off shore tax evasion? The stakes are high. It has been estimated that the U.S. Treasury loses as much as $100 billion annually to offshore tax non-compliance. So back in 2009 in an attempt by the US Government to stop this illegal tax evasion, Senator Max Baucus and Rep. Charles Rangel introduced the Foreign Account Tax Compliance Act. The bill was signed into law on March 18, 2010. FATCA requires foreign financial institutions, including banks and mutual funds, to either collect and disclose data on American clients with foreign accounts holding of at least $50,000, or to withhold 30 percent of the dividend, interest and other payments due those clients and to send that money to the I.R.S. U.S. persons owning these foreign accounts or other specified financial assets must report them on a new Form 8938 which is filed with the person’s U.S. tax returns if the accounts are generally worth more than $50,000; Account holders would be subject to a 40% penalty on understatements of income in an undisclosed foreign bank account. So far so good. But powerful forces have delayed implementation of FATCA until July 1, 2014. Furthermore, in what the Wall Street Journal has reported “a victory for banks worried about the costs and possible disruptions to the financial system” the Treasury Department has decided not to enforce FATCA until 2016.
By the way, just so you know, I’m all for legally reducing taxes. That is what I do for living. I get paid to legally reduce taxes for my clients and I love doing what I do. But I also view my American citizenship as an honor and great privilege. All Americans and American business like Pfizer owe their success to the freedoms American enjoy, freedoms that millions have fought and died for over hundreds of years. Whether legally as Pfizer has done, or illegally as other individual taxpayers have done, it seems to me like a rather unpatriotic thing to do to move money off shore solely to save taxes. My view is that the only winners in the delay of enforcement of FATCA are the big banks, big business, big law firms big accounting firms and the top 1% of Americans taxpayers.
There is still time to do the right thing America. If you don’t like the tax system, tell your elected officials to abolish the IRS with its outdated archaic 100 year old income tax with thousands of pages of insane regulations. Let’s replace the income tax with a 21st century 10% National Federal Sales Tax on all purchases including all internet purchases. Until then let’s try to keep our money and jobs here in the USA and work within our borders to make America a great blessing to our kids and for many generations ahead. God bless America and see you all next month. Kindest regards Chris Moss CPA