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, We thought your readers would be interested in the following article from leading US/UK tax expert Mark Walters, managing director of Frank Hirth, based in London. Frank Hirth also have offices in New York. We do hope you will find the space to include this interesting article, but do not hesitate to contact us if you would like any amendments or additions. We very much look forward to hearing from you. PRESIDENT OBAMA ANNOUNCES INTERNATIONAL TAX PROPOSALS TO GET TOUGH ON TAX HAVENS Earlier this month, President Obama laid out his plans for international tax reform. Long perceived as the most abused section of the tax code, the proposals seek to raise $210 billion over the next 10 years. The stated goals of the tax reforms include reducing the amount of taxes lost to tax havens. In order to “get tough” on tax havens, the proposals include stricter reporting requirements for individuals and financial institutions. The aim is to crack down on perceived abuses of the system by Americans using tax havens to hide their wealth from US taxes. Offshore financial institutions with US clients will be coerced to join the Qualified Intermediary (QI) scheme. Under this programme, financial institutions enter into an agreement with the IRS to share information about their US clients and to produce 1099s as any US financial institution would have to do. In order to meet the QI requirements, all commonly-controlled financial institutions will also have to be QIs. Any financial institution not choosing to join the QI scheme will be assumed to be facilitating tax evasion. US financial institutions will be required to withhold between 20% and 30% on any US payments to customers of non-QI institutions. In addition, any US person holding an account with a foreign institution which is not a QI, will be assumed to have enough funds in their accounts to require foreign bank account reports be filed. It will then be up to the US person to prove otherwise. Further, if the account holds a balance over $200,000 at any point in the year, the failure to file would be deemed “wilful” meaning greater penalties and perhaps criminal charges. These proposals represent a drastic change in the legal presumptions. The new legal presumptions would shift the burden of proof from the IRS to individuals and foreign financial institutions to prove they were not sheltering income or aiding in tax evasion. Both US investors and non-QIs would also be required to disclose transfers of money or property between the US investor and non-QI account, with an emphasis on transfers made by foreign entities on behalf of the US person. In order to aid the IRS, the administration proposes to hire 800 IRS agents devoted to international tax enforcement as well as to extend the statute of limitations for investigations and to increase the penalties on US taxpayers failing to adequately disclose their offshore accounts. Contacts: Mark Walters, Frank Hirth: +44 (0)20 7883 3500 markw@frankhirth.com www.frankhirth.com Lauren Alexander, Maltin PR: +44(0)20 7887 1357 lauren@maltinpr.com www.maltinpr.com Photograph: www.maltinpr.com/mark-walters