Debts and deadbeats

Over 1.6 million businesses owe more than $58 billion to Uncle Sam, according to Senator Carl Levin (D-Mich.) at a hearing before the Committee on Homeland Security and Governmental Affairs on unpaid payroll tax abuse. A study by the Government Accountability Office (GAO) concluded that more than half this debt is now uncollectible.

According to Levin, delinquent businesses not only stash away taxes they owe the government but also steal funds withheld from employee paychecks. Levin pointed out that this widespread failure to remit payroll taxes is a felony and a disgrace. Levin said that in 1998, the GAO found unpaid payroll taxes totalled $49 billion but now it has increased to $58 billion. Levin attributed the cause for this increased tax debt partyly to ineffective Internal Revenue Service (IRS) payroll collection efforts.

Levin focused on three of the hosts of problems identified by the GAO. Levin said that GAO’s report disclosed that 70% of all unpaid payroll taxes owed by businesses are due to repeat offenders. Levin also cited the IRS’ failure to make effective use of available enforcement tools and “deadtime in the queue” where cases are left unproductive until a revenue officer is assigned to them and enforcement action is taken.

Senator Norm Coleman (R-Minn.), ranking member of the Permanent Subcommittee on Investigations, referred to those who fail to pay payroll taxes as “deadbeats” and said they are not only breaching their employees’ trust but shortchanging honest American taxpayers. Coleman said that the IRS estimated $44 billion has been transferred from general tax revenues to Social Security and Medicare. Coleman pointed out that the billions of dollars could have been invested in crucial areas such as healthcare, homeland security and education. Coleman also said that tax-cheats are shifting the tax burden onto honest Americans and are gaining an unfair advantage over honest businesses.

Overseas banks are "Al Capone safe houses" for U.S. clients

On a conference call, Sen. Carl Levin (D-Mich.), Chairman of the Senate Armed Services, and Sen. Norm Coleman (R-Minn.), Chairman of the Senate Homeland Security Committee's Permanent Investigations Subcommittee, explained the "Stop Tax Haven Abuse Act" that will crack down on companies and banks evading tax responsibilities overseas.

The Union Bank of Switzerland (UBS), the word's largest manager of private wealth assets, and the Liechtenstein Global Trust (LGT) were the two banks highlighted during the conference call. Sen. Levin said that UBS and LGT are not the only banks shielding American investors from paying taxes overseas. UBS has 19,000 accounts with U.S. clients in Switzerland, which are valued at $18 billion.

Sen. Levin said that the secretive ways of these banks has not only helped protect their clients from being exposed, but it has also helped the banks themselves. The bill would break through the secrecy by "penalizing banks that impede US tax enforcement, barring them from doing business in the U.S., [and] by terminating them from the qualified intermediary program (QI) so they have to disclose all of their clients not just a limited number that they now have to disclose," Sen. Levin said.

Sen. Coleman said that the Senate could ask for an audit, but the fact is that the banks already have the information about American clients who are evading taxes overseas. Evidence shows that some of the top executives of these American companies have not only known about the banks' actions, but they have approved them, Sen. Levin said.