During its recent hearing examining the tax gap and offshoring, the Senate Finance Subcommittee on Taxation and IRS Oversight learned money in offshore accounts is double previous estimates.
In response to Subcommittee Chairman Sheldon Whitehouse (D-RI), IRS Acting Chief of Research and Analytics Officer Barry Johnson told the subcommittee domestic households hold for as much as $2 trillion in offshore tax havens.
“Today’s hearing shed new light on the murky world of wealth stashed in offshore tax havens,” Whitehouse said following the hearing. “We learned of the staggering $7.5 trillion the tax gap will cost us over a decade – revenue that ought to be helping the American people pay for their priorities or reduce the federal debt. We also learned the universe of U.S. income hidden in tax shelters abroad is double what we thought it was. Typical American taxpayers don’t have the option to hide money abroad, but the ultra-rich and massive corporations certainly do. We need a better handle on the problem of international tax cheats, and we need a stronger IRS to go after them.”
Authorities noted former IRS Commissioner Charles Rossotti said during the hearing the amount of taxes owed but not paid in 2019 amounted to $574 billion and projected a tax gap of that size accumulating to roughly $7.5 trillion over 10 years.
Research suggests the Treasury may lose $40 billion to $123 billion annually from offshore tax evasion. One report estimated that the highest-earning 1 percent of taxpayers hide 20 percent of their income, which they said accounts for 36 percent of unpaid taxes.