Should Tax Evaders Be Given A Safe Haven?

In 2009 and 2011, the IRS has given tax evaders who have hidden money in offshore accounts a chance to come clean and avoid jail time. The two programs have netted the IRS at least $4.4 billion so far, but should the rules be relaxed for these people?

Taxpayers who disclose offshore accounts must pay a 27.5% penalty in addition to any back taxes, interest, and late charges for up to 8 years. But they avoid going to prison.

$4.4 billion is a nice chunk of change, and that lets the U.S. public off the hook for that much money. So maybe we should all be fans of these types of programs. Others will argue that the rich can just pay off their crimes and avoid any real punishment.

Tax evasion costs over $300 billion a year, so we want back as much as we can, right? Maybe $4.4 isn’t a huge number overall, but for the amount of offshore money hidden, it seems to be a decent pull.

I’m just starting to do my taxes and I’m doing everything I can to report properly and follow the laws. I’m not trying to avoid my tax duties. If I do, then it means someone else will have to make up the difference. I don’t like passing the buck on to someone else.

Based on our current economic situation, I am in favor of collecting these payments. The penalties are harsh enough to still make it hurt, and the benefit of a clean conscience, having the money back in the U.S., and not having even more penalties if they are caught instead of turning themselves in.

Readers, what do you think? Should we accept money we wouldn’t have otherwise have or should we be stricter with people who hide money from the government?

16 Responses to Should Tax Evaders Be Given A Safe Haven?

  1. I think occasional amnesty programs are OK. If they become an annual thing then you will have people take advantage of that, but if it’s every now and then, it could encourage people to pay up that probably otherwise wouldn’t. I’ve seen it done in many cities with parking tickets and it’s surprising how many people come pay up when the fines and potential for prosecution goes away, but you know those people would have no intention of paying otherwise. Amnesty saves the cost of going after those people, as well.

    • Daniel says:

      @Money Beagle, I love the idea. The time and money spent prosecuting people (or not spent collecting) that the government saves from these amnesty programs is worth it!

      • Jon -- Free Money Wisdom says:

        @Daniel, I agree with both of you! I think this is brilliant as long as these programs are not abused. Very interesting article!

  2. PK says:

    If it’s occasional we’re probably better off than if it’s annual. If it’s annual, you might have a tax evader evade for a few years with the expectation of coming clean in, say, 2020.

    In this case? I’m not against amnesty. I think we’re better off with the extra funds than the extra jail time.

    • Daniel says:

      @PK, I agree, I think it’s a great way to get money back with minimal effort. But if it’s a constant thing, people will put it off instead of doing it now. Giving one-time amnesty encourages people to do it now.

  3. As a practical matter, the people who had numbered Swiss accounts are also the same people who are highly mobile and likely to re-locate due to taxes. When a country like the US over-taxes them, they frequently just leave.

    Getting something is much better than nothing and impoverishing your country (via an exodus of rich people) at the same time.

  4. frugalportland says:

    If they’re given safe haven, where’s the incentive to report taxes?

  5. Taryn says:

    What is the cost of investigating, prosecuting & imprisoning individuals for tax fraud? Isn’t it more economical to give them incentives to pay their taxes?

  6. krantcents says:

    My character side says nail em for tax evasion, but that is expensive. Giving something up to gain the rest is a practical solution.

  7. Send them to prison and no one will ever come clean. Make them pay a little extra and you might get something.

    Although, the ideal solution would be to eliminate the federal income tax altogether and just let people keep what they earn, no matter where they earn it.

    • Daniel says:

      @Kevin @ Thousandaire.com, I agree with the first half of your comment. I don’t think it’s paying them extra as much as penalizing them less.

  8. If these scammers are always being given a safe haven there is more incentive to scam. I can see possible doing a safe haven a few times but if it becomes a regular thing we are in trouble.

  9. Max Fiorillo says:

    No never tax evaders should not be given a safe heaven

  10. No way… I struggle sometimes to get mine in… and I happily pay what I owe, because it’s a sign that I’m earning income. No one should be free of paying their share or my piece will only go up and I’m not prepared to have that happen.

  11. Well I don’t think anyone should be forced to pay taxes period, so there’s my extreme stance on that. ;) That said… if you do have a tax system… I think it should fit on a page or less, with no loopholes or special conditions that let some get away with paying nothing while others have to pay a much higher burden.

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