Agreements allow for IRS subpoenas
By LINDSAY THOMPSON http://www.thenassauguardian.com/business/340879685734093.php
Guardian Business Editor
Attorney General Alfred Sears says there are different avenues by which
the United States tax collection agency, the Internal Revenue Service,
can request records of tax evaders in The Bahamas.
The IRS has served a summons on Credomatic of Florida Inc. for all
documents of affiliates and subsidiaries pertaining to MasterCard, VISA,
and American Express payment cards issued through, or for banks or other
financial institutions in a number of countries, including The Bahamas.
"Depending on the request, if the IRS is seeking assistance under the
Mutual Legal Assistance Treaty, they would come to the attorney general.
But if they are seeking assistance under the International Cooperation
Act, then they would go to the courts," Mr. Sears told The Guardian on
Meanwhile, no official requests have come from the U.S. government in
keeping with the recently passed Tax Information Exchange Agreement with
"Actually, requests would start to come in next year hence, we are
unlikely to receive any significant requests until after this tax year,"
Mr. Sears said.
As for any foreseeable falloffs in the financial services sector in
light of the TIEA, Mr. Sears said the financial community was expecting
this for a long time because this is an agreement signed between both
governments in January, 2002.
"This was no sudden development; this has been in the contemplation and
calculation of the financial services sector."
Responding to subpoenas by the IRS for records in Bahamian institutions
as part of its tax-evasion investigation, Mr. Sears said that based on
mutual agreements with The Bahamas, the IRS has jurisdiction over its
citizens said to be evading their taxes.
An order issued Sept. 11, 2003, at the U.S. District Court for the
Southern District of Florida allows the IRS to serve summons on
Credomatic as part of an investigation into tax evasion in The Bahamas,
Bermuda and other offshore centres using MasterCard, VISA and American
Other countries involved are Anguilla, Antigua and Barbuda, Aruba,
Belize, British Virgin Islands, Cayman Islands, Dominica, Netherlands
Antilles, Panama, St. Kitts & Nevis, St. Lucia, St. Vincent and the
Grenadines, and Turks and Caicos.
The summons is for the period Jan. 1, 1999, through Dec. 31, 2002,
during which any person or entity associated with the card account had
an address in the U.S., or where such card or account had at least two
transactions, charges or purchases in the U.S. in each of the three
different months during any six-month period between those dates.
IRS agent Joseph C. West said the records sought by the summons will
reveal the identities of and/or disclose transactions by people who may
be liable for federal taxes and will enable the IRS to investigate
whether those people have complied with the internal revenue laws.
He said based on his involvement with a compliance project on offshore
transactions, he discovered that use of payment cards, including credit,
charge and debit cards, as a means of obtaining access to offshore
funds, to be a common practice promoted by offshore professionals and
used by people with offshore accounts.
He cited promotional material from several offshore companies including
Axxess International of The Bahamas; Finor Associates Ltd., of Panama;
Barclays in the Caribbean, Argon Ltd. of St. Vincent & the Grenadines;
KPMG of Belize; and Maritime International Ltd.
Mr. West also cited criminal tax-evasion cases, including an account
with Guardian Bank in The Bahamas; and accounts in the Turks & Caicos
Islands, and the Cayman Islands.
Posted: Wednesday January 7, 2004