TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, April 25, 2017

Slemrod Presents Taxing Hidden Wealth: The Consequences Of U.S. Enforcement Initiatives On Evasive Foreign Accounts At NYU

Slemrod (2017)Joel Slemrod (Michigan) presented Taxing Hidden Wealth: The Consequences of U.S. Enforcement Initiatives on Evasive Foreign Accounts (with Niels Johannesen (Copenhagen), Patrick Langetieg (IRS), Daniel Reck (UC-Berkeley) & Max Risch (Michigan)) at NYU yesterday as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Rosanne Altshuler:

Beginning in 2009, the IRS initiated a series of enforcement efforts to curb the use of offshore accounts to facilitate tax evasion, along with a voluntary disclosure program to encourage individuals with foreign accounts to become compliant with tax law. This paper examines the impact of increased enforcement activity on U.S. taxpayers’ statements of foreign accounts and reported income on tax returns. We find that enforcement initiatives increased the number of individuals reporting foreign accounts to the IRS by at least 19 percent, and they increased total wealth disclosed by at least $75 billion.

This increase was concentrated in countries whose institutions are widely thought to facilitate individual tax evasion. Much of the total effect of enforcement on compliance happened outside official voluntary disclosure programs, from individuals who started declaring income in foreign accounts to the IRS without admitting to any prior evasion or underreporting. Individuals who began to report a foreign bank account but did not participate in the voluntary disclosure programs increased their reported interest income by 63 percent, dividend income by 25 percent, and capital gains by 18 percent.

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