U.S. Taxpayer Revelations From Panama Leak Expected to Be Modest

U.S. Taxpayer Revelations From Panama Leak Expected to Be Modest
By
Amanda Athanasiou
The trove of data released by the International Consortium of Investigative Journalists (ICIJ) May 9 included thousands of offshore entities to the United States, but sources doubt the Panama Papers will expose a windfall of undiscovered rogue U.S. taxpayers. (Related coverage
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"Previous public reports had suggested that there would be little or no nexus to the U.S. in the disclosures coming today, but clicking through the database produces thousands of 'United States' hits for entities, intermediaries, and individuals," Scott D. Michel of Caplin & Drysdale Chtd. told Tax Analysts. "There may be a much larger U.S. connection here," he said, adding that the IRS and the Justice Department are likely comparing the data with filings or other information that may reveal tax noncompliance, or worse.
But Michel also pointed out that the disclosures reveal nothing about whether the structures involved are lawful or not, or whether they have been properly reported to the IRS or other tax authorities. Just as this information may expose tax evasion or more serious criminal conduct, it also constitutes a substantial breach of privacy for many people who've done nothing wrong. "That's a concern," he said.
The data are unlikely to reveal large-scale noncompliance by U.S. taxpayers that hasn't already been disclosed or cleaned up, said Bryan C. Skarlatos of Kostelanetz & Fink LLP. "The main contribution of this data is that it's lifted back the curtain, enabling us to see evidence of hidden accounts and bearer share company structures that the public hears about, but never really sees," Skarlatos said. The primary impact in the U.S. will be to raise awareness about how bank secrecy works around the world, through the use of those bearer share corporations, he added.
Mark E. Matthews of Caplin & Drysdale Chtd., former chief of the IRS Criminal Investigation (CI) division, said he wasn't surprised that so far the Panama Papers leak is not overwhelmingly a U.S. story. He echoed the sentiment of other advisers routinely involved in offshore account compliance who have said they don't see the name Mossack Fonseca very often. "That tells me they haven't been heavily involved in offshore activities of U.S. taxpayers," he said. (Prior coverage
Several U.S. experts noted that although they plan to examine the data for evidence of client involvement, based on the lack of client phone calls regarding the issue in the month since the ICIJ announced the data leak, they don't expect to see many familiar names.
Americans can establish corporate entities with blurry ownership at home, said Victor Song, a former CI division chief who now runs Victor Song Consulting. "In Delaware or Nevada it's very
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