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American Morning
IRS Says Millions Using Off-shore Credit Cards
Aired March 28, 2002 - 09:36 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: The Internal Revenue Service says as many as two million Americans evade taxes by using credit cards that are issued by off-shore banks. The government has already opened hundreds of investigations, they are promising more to come. Andy Serwer, "Fortune" magazine editor-at-large, joins us now. He is going to tell us how this scam works, and how much money we're talking about. A lot of money.
ANDY SERWER, EDITOR AT LARGE, "FORTUNE": A lot of -- this really burns me up, Jack. Not only as a tax payer, but also, you know, watching those sailors and Marines get off the USS Roosevelt yesterday. You're not paying your taxes, you're cheating, you're not doing part here, and it is a growing problem. What is happening, Jack, is millions of Americans are sending their money offshore to garden spots, to beaches, and it's a huge problem. There it is. There's the Bahamas right there. That's where people are sending their money, to places like that. It is a laundry list of the usual tax havens. The Bahamas, Grand Caymans, Hong Kong, Switzerland, Latvia.
CAFFERTY: Once you get the money into a bank in one of these places, how does the scam work?
SERWER: Here's how it works. Basically, it's all money -- any income you get that is not reported to the government, so if you work for a big company and they withhold taxes, you can't do it. But millions of Americans get all kinds of money from independent businesses, contractors, all that kind of stuff. You take the money, you send to an off-shore account in one of those countries. They issue -- this bank issues you a credit card, and then you pay expenses with this credit card. The IRS has no way of tracking this down, because all you have got is a number. If you put the money in a U.S. bank, you might be getting interest, you get 1099-ed on that, they pick that up...
CAFFERTY: Sure.
SERWER: ...and also your name goes right in the computer, so they can match it up. Off-shore banks, no way. They can't pick it up at all, and it is a big, big problem. One to two million Americans, $70 trillion, and the Treasury is losing...
CAFFERTY: Man. SERWER: ...about $50 billion -- $70 billion a year. You can see that. They are estimating they're losing -- and again, that is money that could be used, all variety of things, including the war effort.
CAFFERTY: Absolutely, would take care of the deficit projected for this year, among other things.
SERWER: And you know, the IRS has got a real man-power problem here. They only auditing -- maybe this is good news to some of us -- but they are auditing one out of 160 tax returns now. For instance, New York City, they used to have 150 auditors, one of the wealthiest districts in the country, financially.
CAFFERTY: Right.
SERWER: Now they are down to 23. So, in the past decade, it has really gone way down.
CAFFERTY: Another development, quickly, in the Andersen story.
SERWER: Yeah, this is really interesting to me. The New Jersey Gaming Commission -- this is the commission that regulates gambling in Atlantic City, has ordered casinos in Atlantic City to sever ties with Andersen. Now to me, that is slightly ironic, Jack, of course, because the casinos in Atlantic City have been fighting allegations of links to organized crime for years and years and years. Andersen has been doing the books for these casinos since 1986, always been a stamp of legitimacy, and here it is the tides have turned so much that they're saying you have got to get out, you're not clean enough for us.
CAFFERTY: Unbelievable. Andy, good to see you.
SERWER: Thanks, Jack.
CAFFERTY: Andy Serwer, editor-at-large, "Fortune" magazine.
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