Post image for Transparency Phantom Stalking Bank Info

Transparency Phantom Stalking Bank Info

by Garland M Baker on August 1, 2005

Accounts are open book to investigators

This is a scary story about a phantom called Transparency that is creeping secretly into everyone’s life. Thanks to Transparency, individual and corporate bank accounts are becoming open books for tax investigators from all over the world.

Everybody has noticed all the great new services available for those who use online banking in Costa Rica. One can pay telephone, water, light and other bills via a computer. There is no reason to wait in long lines at the bank or local grocery to pay most monthly bills.

Along with all these great new services, something else is happening, something frightening for those concerned about personal and business privacy.

The computers are getting better and incredibly more efficient. They are tabulating, recording, and archiving everyone’s transactions.

Those who do not use computers to do their banking probably have noticed a different treatment at their bank of choice. This, too, is because of Transparency. It is called “know your customer.”

Transparency was born out of international banking agreements, primarily by accords made by the Basel Committee, established at the end of 1974 by the Group of Ten, the major First World nations. The group’s function is to consult and cooperate on economic, monetary and taxation matters.

The term “transparency” is often used to mean openness in the way institutions work together. It is considered good for government. Originally it referred to institutions in the European Union.

Transparency now means stripping every human being of privacy, in particular financial privacy.

Basel II, the agreement that sustains Transparency, is now in full force, and most banks in the world are having to succumb to its powers or perish. Events of Sept. 11, 2001, provided an anti-terrorism veneer to the agreements.

Greater openness means any regulatory agency, anywhere in the world, can get information it wants through “transparency” cooperation. And the U.S. Internal Revenue Service is promoting training on this around the world, including in Costa Rica.

El Salvador, Nov. 22, passed tax legislation with Legislative Decree number 492. The legislation includes the elimination of access restrictions to information regarding tax matters to guarantee transparency by enabling access to taxpayers’ banking and financial information. The law also includes newfound easy ways with which judicial courts, the Attorney General’s Office, and the U.S. Internal Revenue Service may obtain the information as well.

Article 233, related to bank-client privilege, was modified so it would no longer be an obstacle for the investigation of crimes, audits, and determination of taxes.

Costa Rica has similar new rules in its new tax law, which soon may to be approved by the legislature.

Transparency has friends. For example, one is the U. S. Bureau of Diplomatic Security, which is the worldwide law enforcement and security arm of the U.S. Department of State. These special agents are assigned to U.S. diplomatic posts with a mission that includes nabbing IRS suspects.

These agents, in full cooperation with the Costa Rican government, have arrested at least five suspected U.S. tax dodgers in broad daylight in this country within three months.

In 2002, Costa Rica obligated financial institutions and other businesses to identify their clients and report currency transactions over $10,000, among many other rules. New legislation, expected in 2005, will further close the gaps on any type of secrecy and thus open the doors to full transparency — at least for official investigations.

The point is that Transparency, the phantom, will get some of the cheaters and tax dodgers it was created to find, but most criminals have learned to live with it. Honest people will get gobbled up too, probably more honest ones than bad ones.

How does one beat this phantom?

The only way is to expect full transparency. This means bank accounts had better balance — exactly — with what is reported on financial statements and tax returns.

U.S. citizens selling property in Costa Rica better think twice about failing to report any gains made on those transactions on their U.S. tax returns. There are no capital gains taxes in Costa Rica but there sure are in the United States, and all citizens are required to report and pay a hefty tax on the gain regardless of where the gains were made.

A wise taxpayer will plan for the inevitable and get used to living with full transparency. And get a really, really good tax adviser.

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