Sunday, July 14, 2013
Wall Street Journal: When Are Tax Penalties Excessive? Does a $3.5 Million Fine on a Secret $1.7 Million Swiss Account Violate the Eighth Amendment's Prohibition of Excessive Fines?, by Laura Saunders:
U.S. officials are getting even tougher in their crackdown on offshore accounts.
In a civil lawsuit that has attracted notice among tax experts, the government wants to collect nearly $3.5 million in penalties from a taxpayer who had a secret Swiss account, although the account balance was never higher than $1.7 million. The lawsuit, U.S. v. Carl R. Zwerner, was filed in federal court in Miami last month.
"This is the most aggressive step taken by the U.S. government to seek offshore-account penalties larger than the account balance," says Jeffrey Neiman, a former federal prosecutor now in private practice in Fort Lauderdale, Fla., who specializes in criminal tax cases.
Spokesmen for the Justice Department and IRS declined to comment on the case. A decision isn't expected until at least 2014....
Since 2009, the Justice Department has filed more than 75 criminal cases against U.S. taxpayers involving the alleged failure to declare offshore financial accounts. In many of them, prosecutors have sought a single penalty of 50% of the account's maximum balance as punishment for willful failure to file a foreign-account report.
"As far as I know, the government has never asked for more than one 50% penalty in offshore-account cases," says Jack Townsend, a lawyer at Townsend & Jones in Houston who tracks federal tax-crime data.
Still, U.S. law allows the government to assert multiple 50% penalties. Mr. Zwerner is being pursued for four such penalties -- or about twice the highest balance in his account -- although the suit doesn't say why.