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Friday, May 25, 2012

Effective Exchange of Information and Tax Havens

Hedda Leikvang (J.D. 2012, Vanderbilt), Note, Piercing the Veil of Secrecy: Securing Effective Exchange of Information to Remedy the Harmful Effects of Tax Havens, 45 Vand. J. Transnat'l L. 293 (2012):

The enforcement of tax laws abroad has long posed problems for authorities. However, that enforcement becomes increasingly more problematic when the information necessary for proper enforcement is located within an impenetrable system whose sole purpose is to protect that information from tax authorities in other countries. Although much effort has been expended to remedy the harmful effects of tax havens, few strategies have succeeded. But with the prospects of a record federal deficit and an ever-increasing tax gap, U.S. authorities have begun to look for new ways to strengthen the enforcement of U.S. tax laws abroad. The most prominent of these proposals is the Stop Tax Haven Abuse Act, which invokes the use of a presumption strategy to remedy the lack of information problem. Nevertheless, this Act will most likely fall short of successful regulation. Most importantly, the Act represents a one-sided attempt to regulate a problem that is truly international. Moreover, even if the Act passes, it will provide the IRS few new tools to assist with the collection of taxes. Another issue with the proposed Act is that it invokes a presumption strategy, which may be viewed as an easy runaround for the lack of an automatic exchange provision in the bilateral agreements that currently control the exchange of tax information with foreign authorities. This Note summarizes and analyzes the current regulatory framework and proposes a strategy for the unification of existing regulatory regimes to provide a more effective system for combating the harmful effects of tax havens.

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