If the United States wants improved access to extraterritorial tax information, it should push to change the internationally agreed-upon “barter system” currently in use, argues Brooklyn Law School Professor Steven A. Dean in a recent opinion piece published by The National Law Journal.
Because U.S. taxpayers are able to hide income in certain countries overseas, the IRS loses about $50 billion in unpaid taxes each year, according to Professor Dean’s August 27, 2007 editorial, “End the Barter System.” Under this system, championed by the League of Nations 80 years ago, pairs of nations agree on the identical information they will provide each other concerning the activities of taxpayers. The barter system should be abandoned, argues Professor Dean, because the information the IRS receives is essentially useless, as it lacks taxpayer identification numbers, is provided in foreign languages and currencies, and is not timely.
"Barter systems never work very well,” writes Professor Dean. “It is long past time to ask whether U.S. tax authorities would have more luck acquiring the information they need from other jurisdictions if they did not have to persuade each foreign country that it needs the same information from us.” He suggests that the United States develop a list of information that tax authorities need, and pay willing jurisdictions to gather and report it.
Read the full opinion piece.
Read more about Professor Dean.