Articles Posted in Tax evasion

New York State has the most advanced whistleblower law in the country which, among other things, allows for whistleblower claims against state tax cheats and for the whistleblowers to collect a percentage of the moneys reimbursed.  The question is, why is New York the only state to pass such a law? It is well established that millions in state taxes go unpaid each year due to tax evasion. Although the New York law has not been in existence very long, it has been very effective in catching tax cheats. To the benefit of the New York economy. It also gives incentives to whistleblowers who are entitled to up to 30% of the amounts collected by the state.

Note today’s announcement from New York Attorney General Eric T. Schneiderman that Topline Appliance Center and its principal owner, Michael Moretti, have agreed to pay $1.56 million to settle allegations that they knowingly failed to collect and pay sales taxes and corporate franchise taxes to New York over an almost 10-year period. Topline Appliance Center has multiple locations in New Jersey, and it sells and delivers high-end appliances to New York customers.

Attorney General Schneiderman alleges that over the course of almost 10 years, Topline Appliance Center and Moretti sold or delivered high-end appliances to New Yorkers from their New Jersey stores without collecting any New York State and local sales taxes.  Topline also failed to pay proper New York corporate franchise taxes despite doing business in New York.  Failing to collect and pay these taxes gave Topline an improper competitive advantage over appliance stores located in New York.

Recently Switzerland and Singapore agreed to share tax information about American tax evaders. On May 6, 34 members of the Organization for Economic Cooperation and Development (OECD) and 13 other nations signed an agreement on gathering tax-related information from financial institutions and will exchange it every year.

This means that for those trying to evade taxes, nations like Switzerland and Singapore will not longer allow them to hide behind secrecy laws.

However, certain countries in Central Asia and Africa will not abide by such agreements and some experts feel that tax evaders will shift their moneys to banks in those nations in order to keep from paying the tax man. This may include major international corporations.

Some American investors have concocted a scheme to evade U.S. taxes by sending their money offshore and then investing from there in U.S. stocks or bonds. A recent study says that this is costing our country billions in unpaid taxes.

In order to do the round tripping, an American citizen will set up a bank account in a foreign tax haven like the Cayman Islands. Then they place their moneys into those accounts and use it to purchase stocks and bonds back in the states. Continue reading

US tech giant Apple has shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the last decade, according to an investigation by The Australian Financial Review.

Last year Apple reported pretax earnings in Australia of only $88.5 million after it sent an estimated $2 billion of income from its Australian sales to Ireland via Singapore, where Apple negotiated a secret tax deal in 2009. Continue reading

New York State’s whistleblower law is the first in the nation to include a provision allowing whistleblowers to collect a reward for helping the state to recover moneys from tax evading companies and people.

The law works like this: a citizen can bring a lawsuit against a person or business that makes more than $1 million in annual income and defrauds the state of more than $350,000 by knowingly making a false claim. The whistleblower gets up to 30 percent of what the state collects. It is similar to the Federal False Claims Act. Continue reading

Attorney General Eric T. Schneiderman won a major victory today in the first of its kind lawsuit against Sprint-Nextel Corp for deliberately under-collecting and underpaying millions of dollars in New York State and local sales taxes on flat-rate access charges for wireless calling plans.

The case was brought under the New York False Claims Act and it seeks to require Sprint to pay three times the underpayment of approximately $130 million plus penalties. Continue reading

Tax authorities in France are are reviewing the company books there for possibly shifting its income to companies set up in Switzerland and Luxembourg for tax avoidance. Similar allegations have been brought against Prada and Dolce & Gabbana in Italy .  Similar allegations were also made against Apple Inc. in 2012.

McDonald’s denies wrongdoing. Continue reading

Florida psychiatrist Patricia Hough, who helped to building two Caribbean medical schools is accused of using accounts at UBS AG, the largest Swiss bank and elsewhere to hide income from the IRS to the tune of $34 million according to tax authorities.  The case, pending in federal court in Fort Meyers is the largest in dollar value of any case to reach trial since the offshore crackdown by the IRS began.

Dr. Hough is accused of conspiring  to use secret Swiss accounts to hide the millions made when they sold the schools.

Prosecutors accused her of conspiring with Swiss financial adviser Beda Singenberger and UBS banker Dieter Luetoff to hide the moneys.

Happy’s Pizza, which has more than 100 franchises kept two sets of books says Uncle Sam and lied about how much money the pizza shops made.

In addition, the company founder Happy Asker has been indicted for federal conspiracy that he cheated the government out of millions in taxes. Agents from the DEA, ATF and IRS converged on Happy;s corporate HQ and seized business and personal records.

The indictment said that the tax scheme ran from 2004-2011 and that fake numbers were provided to accountants and tax preparers. Meanwhile, a second set of books recorded the real figures and the franchise partners who kept the books allegedly got a piece of the real net profits once a week.

Although much has been written about the IRS whistleblower program which last year saw a whistleblower collect $104 million in rewards for reporting tax evaders, not much has been mentioned about whistleblowers who report companies that purposely do not pay their sales taxes. Most states have sales taxes on goods sold or exchanged in those states. The amount varies from 5-7% but companies selling products are required to pay sales taxes in those states with such laws and where the transaction occurs in those states. Even though the laws are clear, alot of companies, especially those in offices in various states, try to evade the taxes by just not paying them. In addition, even in those states that do not have actual whistleblower laws on the books, whistleblowers with information about sales tax fraud can usually negotiate a reward of a significant percentage of the moneys recovered by the states. It usually ranges from 15-35% of the moneys collected. It helps to have an experienced lawyer. The information has to be original and generally the amounts of sales tax fraud must be substantial for the states to be interested. It also helps to have documentary support for your allegations in the form of invoices or other documents showing the sales. There have been some very large cases. In one case pending in New York State, Sprint has been charged with seeking to dodge over $300 million in sales taxes. With interest and penalties, that amount could run the company in excess of $700 million and the whistleblower could receive up to $200 million, which would be the single largest whistleblower award relating to tax fraud ever rendered. If you are aware of corporate tax fraud, contact attorney Jeffrey Newman for a free consultation. Jeffrey Newman represents whistleblowers. Jeffrey.Newman1@gmail.com