In a letter to IRS Commissioner Doug Shulman three law professors from American University’s law school have expressed their concern about the deal in the following words (hat tip tax.com and a reader, emphasis mine):
August 19, 2009Hon. Douglas Shulman
Commissioner, Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Dear Commissioner Shulman:
We have been following the news reports of the IRS’ very commendable efforts to challenge US tax evasion protectively cloaked by Swiss bank secrecy laws. The latest US-Swiss declaration of August 19, 2009 represents the fruit of those efforts and will result in the IRS receiving information about several thousand US taxpayers with Swiss accounts. The agreement provides that UBS will first notify account holders that their names are to be shared with IRS and to afford those account holders a chance to dispute the disclosure under Swiss law.
We have also watched with interest the IRS’ efforts to promote voluntary disclosure by US taxpayers prior to IRS’ commencement of examination. With the lure of amnesty in the form of no criminal action and reduced civil penalties, the IRS hopes taxpayers will come forward “voluntarily.” This general concept is equally laudable. However, the IRS’ promise to keep open the September 23 amnesty deadline for taxpayers who come forward even after they receive notice from UBS that their names are about to be revealed is the point at which we depart company with IRS policy.
It seems that when a taxpayer is told he is about to be “given up”, the leniency of the amnesty is no longer warranted. The self-identification is no longer “voluntary.” Ordinarily, a taxpayer who accepts an amnesty offer gives up the chance, however slim, of being overlooked; the government is spared the effort to ferret him or her out; and the reward of lesser sanctions has some cogency. Here, though, the taxpayer is specifically identified, forgoes no chance of staying under the radar, and spares the government nothing. Admittedly, the window of time for all of this is short, but the principle of amnesty for less-than-really-voluntary disclosure seems unduly generous.
Our law school operates a low income taxpayer clinic. In the last few years, we have seen an increase in the assertion of penalties against the poorest, least sophisticated taxpayers with virtually negligible room for negotiation by the IRS. It would seem that a blanket program of offering reduced penalties and no criminal action to wealthy, sophisticated tax dodgers who come forward on the eve of their names being turned over to the IRS and with prior knowledge of the forthcoming disclosure, is suggestive of something less than even handed tax administration.
Very Truly Yours,
Nancy S. Abramowitz
Profs., Washington College of Law
I can only agree with that. It is not long ago the Supreme Court of the United States wrote in Boumedienne v. Bush (emphasis mine):
(iii) The Government’s sovereignty-based test raises troubling separation-of-powers concerns, which are illustrated by Guantanamo’s political history. Although the United States has maintained complete and uninterrupted control of Guantanamo for over 100 years, the Government’s view is that the Constitution has no effect there, at least as to noncitizens, because the United States disclaimed formal sovereignty in its 1903 lease with Cuba. The Nation’s basic charter cannot be contracted away like this. The Constitution grants Congress and the President the power to acquire, dispose of, and govern territory, not the power to decide when and where its terms apply. To hold that the political branches may switch the Constitution on or off at will would lead to a regime in which they, not this Court, say “what the law is.” Marbury v. Madison, 1 Cranch 137, 177. These concerns have particular bearing upon the Suspension Clause question here, for the habeas writ is itself an indispensable mechanism for monitoring the separation of powers. Pp. 34–36.
The same problem does exist here as well. How can the protections granted in the Constitution just be turned on and off at will by the governement purporting that there is an international issue (or a conflict of two jurisdictions in this case) that required an international contract which does away with the rights granted in the Constitutions? Methinks it cannot be at all!
Gentlemen, the nation’s basic charter cannot be contracted away like this. Me shudders if this should become the norm.