Tax evasion is apparently more widespread in the US than previously thought – at least among the super-rich. This is the result of a new study by the US Federal Tax Agency (Internal Revenue Service), reported by the Bloomberg news agency. Accordingly, those Americans who belong to one percent of the super-rich do not report more than 20 percent of their income to the tax authorities.
Random audits in this group would reveal tax evasion again and again, according to the study. But the US tax authorities would easily overlook assets that are hidden in offshore accounts and other complicated financial structures. Collecting all unpaid income taxes from the super-rich would increase U.S. Treasury Department revenues by $ 175 billion a year, the study said.
“We emphasize that our estimates of the extent of circumvention are likely to be conservative,” the authors write. While many forms of income, including salaries, are automatically reported to the tax authorities and easily uncovered on a baseline audit, the profits of private companies and complex investment partnerships are harder to understand.
The study was conducted by two Treasury researchers, John Guyton and Patrick Langetieg, and three professors: Daniel Reck from the London School of Economics, Max Risch from Carnegie Mellon University, and Gabriel Zucman from the University of California at Berkeley.
The hidden income at the top means income and wealth inequality could be more skewed than researchers previously estimated, the authors conclude. The researchers suggest that the tax authority should employ “additional tools” to “effectively combat high-income tax evasion,” including the use of whistleblowers and more specialized audits.
The investigation should further fuel the discussion about a famous suspected tax evader: Donald Trump. The former US president, whose real fortune has been speculated for years, is in trouble with the judiciary because of his financial conduct. Manhattan District Attorney Cyrus Vance is investigating the Trump Organization on suspicion of criminal banking and insurance fraud, tax evasion and manipulation of business results.