This is letter addressed to the new President bringing his attention to America's large Tax Gap, and what to do about it.
Dear Mr President,
Firstly, my sincere congratulations on your election to the position of the most powerful leader in the First World.
I believe you will do justice to your position, and be the catalyst for many changes that this country must face.
I write to you about one of those challenges.
It relates to a suggested solution to the major deficit the Federal government has as a result of the current $ 8,7 trillion debt, and added to this the fact that the Federal Government has spent the approximate $ 50 trillion owing to the baby boomer generation now retiring (being social security and health benefits). The total $ 58 trillion estimated debt makes up close to 70% of the nations GDP.
The USA has only been in a worse position once, and that is at the close of the 2nd World War when the total deficit was about 120% of GDP. The world was very different then, and the USA embarked on major expansions in their economy, both internally and internationally. The USA was a surplus exporter. The position, as you know is different today. America is a net importer as the consumers of the nation continue to incur more debt to fund their consumption driven lifestyles. To change this culture will take something close to a miracle, and to simply rely on this fact, in my personal view would be a mistake.
One solution area lies with the current tax system that is operating and functioning in the Federal Government.
The current annual TAX GAP in the USA is at approximately $ 350 bn per year! That is an astounding figure when you consider this is tax actually due to the Federal Government, that is collectible, but that is not actually collected because the tax system is not developed enough! For a country that can monitor the activities of subversives the other side of the world, this seems amazing. The Federal Government is walking away from $ 350 bn in taxes that is actually payable. That translates to approximately $ 3,5 trillion in the next ten years.
To collect this $ 3,5 trillion in the next 10 years will make a big difference to the outcome of your administration.
It will require some careful strategies, and that is where I come in. Before I go further, the following part is not to promote the book that I write of, but to offer you and your administration initially my knowledge and expertise, at no cost, to assist with a solution - as a contribution to this great nation. My abilities and contribution can then be judged and the appropriate equitable arrangement can be made into the future.
I have recently published a short book on Tax Risk Management for taxpayers. It is published by Lexis Nexis. Details of my background as International Tax Attorney and the book are available on my website
www.dnerasmus.com.
I am more that happy to send you a pdf copy at no cost. I can also arrange to send you printed copies at no charge. The book deals with the process that corporations should follow to co-operate with the IRS, so as to ensure they pay all taxes due, and co-operate withthe IRS, to ensure a smoother tax process into the future where they are in for no surprises. The IRS is currently running a test program with about 70 corporations applying the principles set out in my book.
These principles, if properly applied throughout the USA to large corporations, and importantly, to small ones as well, will change the approach of Americans to tax, and it will contribute greatly to collecting that $ 350bn tax gap.
The strategy must start with the advisors of these businesses, and the advisors of individual taxpayers, to change teir mindset, to voluntarily pay what is actually due. To make sure they calculate what is properly due, and pay it - in the face of now dealing with a more reasonable IRS who can focus their money and efforts chasing down the big tax evaders.
This email can only give you some information. As I have offered, I am happy to share my full strategy with you and your administration, if you decide so.
All the best Mr President Elect.
Warm regards,
Daniel Erasmus
www.dnerasmus.com
561-568-7115
Friday, February 13, 2009
OECD influenced countries standardize their systems: Are you adapting your tax risk management systems in line with these developments?
The OECD Tax Administration division, under the chairmanship of South African Tax Commissioner, Pravin Gordhan, has recently released an OECD report investigating the overlap of various tax administration systems in 43 countries, and the similarities are remarkable. What does this mean to Taxpayers?
The obvious advantge is that you can expect similar treatment in the 43 countries in the approach of tax administrators to verification audits and the follow up tax administration review procedures: both areas being the source of significant tax risk especially to large taxpayers in those countries. A recent review of 15 of those countries delivered a completed verification audit exposure only to large taxpayers of some $ 41 bn!! That is significant.
Special processes should be implemented to manage the interaction with tax administrations, especially for large multi-national taxpayers. If you are interested in our blueprint, email daniel@dnerasmus.com .
For more information, visit the website of the OECD and download the report.
The obvious advantge is that you can expect similar treatment in the 43 countries in the approach of tax administrators to verification audits and the follow up tax administration review procedures: both areas being the source of significant tax risk especially to large taxpayers in those countries. A recent review of 15 of those countries delivered a completed verification audit exposure only to large taxpayers of some $ 41 bn!! That is significant.
Special processes should be implemented to manage the interaction with tax administrations, especially for large multi-national taxpayers. If you are interested in our blueprint, email daniel@dnerasmus.com .
For more information, visit the website of the OECD and download the report.
Being an Expat in 2009 - A Financial Primer
Extract from an article by Kate James
To believe the surveys, half the world is either already an expat, or planning to become one. Tens of millions of people work abroad, or have retired there, or have property in a foreign country.
Extract follows -
In this month's LTX focus we take a fresh look at Beign An Expat In 2009 - A Financial Primer.
To believe the surveys, half the world is either already an expat, or planning to become one. Tens of millions of people work abroad, or have retired there, or have property in a foreign country.
Once upon a time, perhaps in the days of the British Raj, expatriates had a financially golden life style in recompense for the perceived horrors of a foreign posting involving endless travel, unpleasant insects and unpronounceable but deadly diseases. Once you had shaken the dust of London or Paris or Philadelphia from your feet, you could forget all about tax inspectors and set about hiring an extensive staff of punkah-wallahs and major-domos to run your immense colonial villa while you drank gin and tonic on the verandah (against malaria, of course).
After your 30 years in the sunshine, with wrinkled skin and full pockets, you could retire to a small country house in the Home Counties, New England or Normandy, to swap travellers' tales with your neighbours.
The reality nowadays is both more mundane and more challenging. Over-crowded airports, intrusive tax inspectors, the Internet and hyper-active investment advisers are just some of the features that are combining to form a new and very different landscape for expats.
But at least today's expat is not short of advice from the banks which offer international financial services.
HSBC Bank International has now completed an ambitious project to conduct the largest ever survey of expats. The bank says that its report, the third and final study in its 'Expat Explorer' survey, is the largest ever independent survey of expatriates, questioning 2,155 expats across four continents. The report examines the integration challenges faced by expats relocating to a new country by looking at the cultural and social differences experienced. The report shows that Germany, Canada and Spain are perceived to be the easiest countries to settle in.
Martin Spurling, Chief Executive Officer for HSBC Bank International and Head of HSBC Global Offshore, said: “We commissioned this independent survey to take a look into the lives and experiences of our customers who live across the globe and the transitional challenges they encounter from country to country.”
He added: “This final report in our Expat Explorer series focuses on something that is incredibly important to all expats – their ability to fit in to their new home. This is often the aspect that is most daunting, with many concerned about whether or not they will be able to make friends or feel like they belong in their adopted country. Through this survey we have been provided with a fascinating insight into our customers’ lives which will help us also to best adapt to their offshore finance needs.”
You can read the rest of the feature here: http://www.investorsoffshore.com/html/specials/special_expat_2009.html
To believe the surveys, half the world is either already an expat, or planning to become one. Tens of millions of people work abroad, or have retired there, or have property in a foreign country.
Extract follows -
In this month's LTX focus we take a fresh look at Beign An Expat In 2009 - A Financial Primer.
To believe the surveys, half the world is either already an expat, or planning to become one. Tens of millions of people work abroad, or have retired there, or have property in a foreign country.
Once upon a time, perhaps in the days of the British Raj, expatriates had a financially golden life style in recompense for the perceived horrors of a foreign posting involving endless travel, unpleasant insects and unpronounceable but deadly diseases. Once you had shaken the dust of London or Paris or Philadelphia from your feet, you could forget all about tax inspectors and set about hiring an extensive staff of punkah-wallahs and major-domos to run your immense colonial villa while you drank gin and tonic on the verandah (against malaria, of course).
After your 30 years in the sunshine, with wrinkled skin and full pockets, you could retire to a small country house in the Home Counties, New England or Normandy, to swap travellers' tales with your neighbours.
The reality nowadays is both more mundane and more challenging. Over-crowded airports, intrusive tax inspectors, the Internet and hyper-active investment advisers are just some of the features that are combining to form a new and very different landscape for expats.
But at least today's expat is not short of advice from the banks which offer international financial services.
HSBC Bank International has now completed an ambitious project to conduct the largest ever survey of expats. The bank says that its report, the third and final study in its 'Expat Explorer' survey, is the largest ever independent survey of expatriates, questioning 2,155 expats across four continents. The report examines the integration challenges faced by expats relocating to a new country by looking at the cultural and social differences experienced. The report shows that Germany, Canada and Spain are perceived to be the easiest countries to settle in.
Martin Spurling, Chief Executive Officer for HSBC Bank International and Head of HSBC Global Offshore, said: “We commissioned this independent survey to take a look into the lives and experiences of our customers who live across the globe and the transitional challenges they encounter from country to country.”
He added: “This final report in our Expat Explorer series focuses on something that is incredibly important to all expats – their ability to fit in to their new home. This is often the aspect that is most daunting, with many concerned about whether or not they will be able to make friends or feel like they belong in their adopted country. Through this survey we have been provided with a fascinating insight into our customers’ lives which will help us also to best adapt to their offshore finance needs.”
You can read the rest of the feature here: http://www.investorsoffshore.com/html/specials/special_expat_2009.html
Tax authorities are doing more focused audits
Extracts from the latest E & Y tax risk report
Companies are looking to work more effectively with tax authorities, especially with increased global enforcement and information exchange across geographies. The OECD's proposals for enhanced relationships with large companies underscores the trend. Companies, boards of directors, independent auditors and other stakeholders are holding tax professionals accountable to identify and address risk issues in an effort to identify and address potential controversy.
Another area where tax executives have noticed a change since 2006 is in the increased sophistication of many global tax authorities. In the UK, the UK tax authority is focusing much more resource on high-risk companies particularly those that have undertaken significant amount of tax planning combined with having processes and systems that are not robust. Companies will need to be prepared for undertaking ward at readiness and documentation reviews and more generally undertaking risk, process and control reviews to lower their risk rating to avoid being rated high risk by revenue authorities.
This more targeted approach of investigation is taking place in other jurisdictions around the world as well.
Companies are looking to work more effectively with tax authorities, especially with increased global enforcement and information exchange across geographies. The OECD's proposals for enhanced relationships with large companies underscores the trend. Companies, boards of directors, independent auditors and other stakeholders are holding tax professionals accountable to identify and address risk issues in an effort to identify and address potential controversy.
Another area where tax executives have noticed a change since 2006 is in the increased sophistication of many global tax authorities. In the UK, the UK tax authority is focusing much more resource on high-risk companies particularly those that have undertaken significant amount of tax planning combined with having processes and systems that are not robust. Companies will need to be prepared for undertaking ward at readiness and documentation reviews and more generally undertaking risk, process and control reviews to lower their risk rating to avoid being rated high risk by revenue authorities.
This more targeted approach of investigation is taking place in other jurisdictions around the world as well.
2008 Ernst & Young Tax risk survey: Steady course: uncharted waters
2008 Ernst & Young Tax risk survey: Steady course: uncharted waters Managing tax risk continues to be one of the toughest challenges for tax departments around the world. 541 companies from 18 countries took part in this year’s survey, enabling EY to identify global trends in tax function priorities, time allocation and success measures.
From EY:
Tax risk is everywhere
Our third global tax risk survey finds that companies continue to face increased pressure on the tax function. As a result, tax functions are focused on addressing risks in every major area of the tax lifecycle - planning, provision, compliance and controversy. Improving the tax function is clearly more important than ever, with more than 90% of companies indicating this will be an important area for them over the next two years.
People are a tax risk
87% of respondents identified people issue as an important challenge facing the tax department. Companies are struggling to get enough people to staff their tax department. They are also challenged to train the people they have, with 77% of companies indicating that the lack of skilled resources is a contributing factor to tax risk.
The trend - proactive versus reactive
Today, companies report a significant increase in the time they’re spending identifying, managing, tracking and responding on tax risk. The number of companies who spend at least 20% of their time on tax risk increased over the last two years from 16% to 25%. leading tax functions are responding by becoming more efficient and broadening their response to risk. Building linkages to other parts of the organization is becoming increasingly important.
Communication is key
According to our findings, companies that have regular communications with their board about tax risk are also more likely to report having specific measures in place to address those risks. The difference seems to be that they take a broad approach to tax risk assessment and work to efficiently leverage their people, processes and technology.
We’ve come a long way….but there’s a long way to go
Tax departments continue to face risk, both from within the organization and the external environment. Demands from stakeholders are increasing. global economic uncertainties can be expected to continue. A comprehensive approach to tax risk management will be key to charting a steady course…in uncharted waters.
Download the “2008 Ernst & Young Tax risk survey: Steady course: uncharted waters” (pdf, 2.5mb)
From EY:
Tax risk is everywhere
Our third global tax risk survey finds that companies continue to face increased pressure on the tax function. As a result, tax functions are focused on addressing risks in every major area of the tax lifecycle - planning, provision, compliance and controversy. Improving the tax function is clearly more important than ever, with more than 90% of companies indicating this will be an important area for them over the next two years.
People are a tax risk
87% of respondents identified people issue as an important challenge facing the tax department. Companies are struggling to get enough people to staff their tax department. They are also challenged to train the people they have, with 77% of companies indicating that the lack of skilled resources is a contributing factor to tax risk.
The trend - proactive versus reactive
Today, companies report a significant increase in the time they’re spending identifying, managing, tracking and responding on tax risk. The number of companies who spend at least 20% of their time on tax risk increased over the last two years from 16% to 25%. leading tax functions are responding by becoming more efficient and broadening their response to risk. Building linkages to other parts of the organization is becoming increasingly important.
Communication is key
According to our findings, companies that have regular communications with their board about tax risk are also more likely to report having specific measures in place to address those risks. The difference seems to be that they take a broad approach to tax risk assessment and work to efficiently leverage their people, processes and technology.
We’ve come a long way….but there’s a long way to go
Tax departments continue to face risk, both from within the organization and the external environment. Demands from stakeholders are increasing. global economic uncertainties can be expected to continue. A comprehensive approach to tax risk management will be key to charting a steady course…in uncharted waters.
Download the “2008 Ernst & Young Tax risk survey: Steady course: uncharted waters” (pdf, 2.5mb)
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