Category

international

Category

Technology has changed the world. It’s crazy to me that these days, I could sit on an airplane and send an email to my brother under the ocean (he’s a submariner). Or that I can, with the click of a mouse, have almost anything delivered to my house from trees to laundry detergent to a car. Or that I can, as I did last week, have virtual face-to-face meetings with clients in South Africa and Spain inside of an hour. These advancements have made our lives easier, but that’s not always the case. Sometimes, technology can be used in ways that exploit, rob, and paralyze good people. And those threats are exactly what the Joint Chiefs of Global Tax Enforcement (J5) are working together to end.

The J5 organized last year to combat crime on a global level by sharing resources. The J5 consists of criminal intelligence communities from Australia, Canada, the Netherlands, the United Kingdom and the United States who are committed to collaboration in the fight against international and transnational tax crime and money laundering. Membership of the J5 includes the heads of tax crime and senior officials in tax agencies, including Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Fiscale Inlichtingen-en Opsporingsdienst (FIOD), HM Revenue & Customs (HMRC) and Internal Revenue Service Criminal Investigation (IRS-CI). You can read more about the J5 here.

The J5 marked its one-year anniversary this year in Washington, DC. The meeting coincided with a global cyber training event hosted by the United States at the World Bank. The timing emphasizes the group’s focus on shared areas of concern and cross-national tax crime threats, including cybercrime and cryptocurrency.

As part of their efforts, the J5 are involved in more than 50 investigations involving sophisticated international enablers of tax evasion, including a global financial institution and its intermediaries who facilitate taxpayers to hide their income and assets around the world. The agencies are also working together on other criminal cases such as those involving money laundering and the smuggling of illicit commodities. 

How effective are they? The group claims there have been more data exchanges between J5 partner agencies in the past year than the previous ten years combined. While working within existing treaties and laws, that shared information means that the members can open new cases more quickly, develop existing cases more rapidly, and find efficiencies to reduce the time it takes to work cases. 

Hans van der Vlist, General Director FIOD, praised the group’s cooperation, saying that it is “becoming more effective and operational.” He noted that just two weeks ago, they were able to remove an important online mixer for cryptocurrencies and are now analyzing the mixer’s information. Online mixers are companies that pool cryptocurrency funds together and create a series of new transactions – allegedly to hide the source of the funds. In that way, it’s like an ultra-sophisticated version of money laundering.

Given its track record, it’s no surprise that the Internal Revenue Service – Criminal Investigation (IRS-CI) is an active partner in these joint efforts to combat global crime. “I’m extremely proud of the work we have accomplished in just one year since the formation of the J5,” said Don Fort, Chief of IRS-CI. “Each country came to the group with expectations and challenges that needed to be overcome so we could each realize our goal. We have found innovative ways to tackle these problems, remove barriers, and develop processes that make the sum of all of our parts a much more efficient and successful organization. It is not a good time to be a tax criminal on the run—your days are numbered.”

The J5 are also focused on information sharing. One of the platforms that the J5 uses is Financial Criminal Investigation (FCInet), a decentralized virtual computer network that enables agencies to compare, analyze, and exchange data anonymously. The platform provides real-time information and allows agencies from different jurisdictions to work together while respecting each other’s local autonomy. With FCInet, Financial Criminal Investigation Services (FCISs) like IRS-CI can connect information without the need to surrender data or control to a central database and without jeopardizing rights to privacy. You can find out more here.

As part of the anniversary event, members underwent cyber training hosted by IRS-CI, a leader in cyber-crimes and the investigative work worldwide, in conjunction with the World Bank. Attendees received training on virtual currency, blockchain, and the dark web. Members also learned more about cryptocurrency tracing and open source intelligence. 

The J5 continues to collaborate internationally to reduce threats to tax administrations that might be posed by cryptocurrencies and cybercrime and to make the most of data and technology. For more information about the J5, you can check out the IRS-CI’s J5 webpage here.  

You may think you know what a taxpayer with foreign assets looks like. It’s easy to paint a picture of the super-rich jetting off to the Caymans, but that’s more Hollywood-driven than real life. Taxpayers with control over foreign assets come in all shapes and sizes. It’s the executive who works in the U.S. on a non-immigrant visa. It’s the mom who opened a bank account for her daughter during a school year abroad. It’s the woman who worked for a few years in Europe and built a little nest egg to which she hoped to retire. It’s the son who opened a bank account in his mom’s home country to take care of her while she was ill. And it’s even the woman whose husband waited in the car while she visited our office because, as she told us, he didn’t know about her Swiss account.

No matter the circumstances, U.S. citizens and resident aliens, including those with dual citizenship, may have to report certain foreign assets.

Who has to file?

Depending on the nature of your assets, you may have to file one or more forms. The most common tax form to file for foreign assets is the annual Report of Foreign Bank and Financial Accounts (more commonly, FBAR). Each “US person” with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in any foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. In other words, if the total of your interests in all of the foreign accounts in which you have an interest reaches $10,000 or more at any point in the calendar year, you may need to file an FBAR. That applies even if you’ve been faithfully reporting the income on your federal income tax return and even if you’ve never, ever repatriated a single dollar to the U.S. It also applies even if the account produces no taxable income. Some exceptions apply.

How do I file?

The Financial Crimes Enforcement Network (FinCEN) form 114, or individual FBAR, is only available through the BSA E-Filing System website.

What is the deadline to file?

The deadline for filing the FBAR is the same as for a federal income tax return. This means that the 2018 FBAR must be filed electronically with FinCEN by April 15, 2019. 

Can I file my FBAR with an extension?

Yes. In 2016, FinCEN announced that it would automatically grant all taxpayers filing an FBAR a six-month extension to October 15.

What happens if I should file an FBAR but choose not to file?

Failure to comply with FATCA or file an FBAR can result in civil penalties, criminal penalties or both.

Wait… You said there might be other filing requirements?

Yes. You probably already know that the U.S. taxes its citizens and resident aliens on their worldwide income. That means you have to report all income from all sources unless excluded. When you file your tax return, pay special attention to Schedule B, Part III, which asks about foreign accounts:

Other forms that might be required include form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts and form 8938, Statement of Specified Foreign Financial Assets. If you’re not sure whether you need to file additional forms and you inherit or hold foreign assets, check with your tax professional.

If I owe, can I pay in Euro? Or Real?

Nope. Income and expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. And, any tax payments must be made in U.S. dollars.

What do I do if I’m not current with my foreign asset reporting?

The Offshore Voluntary Disclosure Program (OVDP) ended on September 28, 2018. However, the Streamlined Filing Compliance Procedures (SFCP) remains in place for taxpayers who might not have been aware of their filing obligations.

Delinquent FBAR procedures are available to taxpayers who do not need to use either the OVDP or the SFCP to file late or amended tax returns to report and pay additional tax, but who have not filed timely FBARs; taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about the delinquent FBARs are not eligible for the program. Delinquent international information return procedures are available to taxpayers who have not filed one or more required international information returns (such as form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and have reasonable cause for not doing so; as before, taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about late or missing returns are not eligible for the program.

Is owning foreign assets a crime?

Simply having assets offshore isn’t a crime, but failing to report them may be.

Where can I go for more information?

The IRS has an International Taxpayers page on its website. You can also check out IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (downloads as a PDF).

If you don’t think what you post on social media matters, think again. France has announced that it will begin searching social media accounts next year in an effort to crackdown on tax fraud.

Gerald Darmanin, France’s Minister of Action and Public Accounts, made the announcement as part of an interview he gave to the news show, Capital. The episode will be broadcast Sunday night on France’s national TV channel M6. An excerpt of the show (in French, d’accord) is available here.

According to Darmanin, the government plans to analyze data available on social media sites to determine whether certain taxpayers are living beyond their means. The government “will be able to see that if you have numerous pictures of yourself with a luxury car while you don’t have the means to own one, then maybe your cousin or your girlfriend has lent it to you… or maybe not,” says Darmanin. And yes, that’s all without a subpoena – remember, they’re looking at publicly available data.

Sound bizarre? It’s already happening in other countries, including the United States, albeit not in such an organized and public fashion. The government has long many tools, including social media, to investigate potential tax fraud. In one of the most infamous cases, Rashia Wilson of Tampa, Florida, famously bragged on Facebook while surrounded by piles of money:

I’m Rashia, the queen of IRS tax fraud. … I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b———.

In fact, Rashia regularly bragged online about her crimes. At court, Assistant U.S. Attorney Mandy Riedel actually read excerpts of Wilson’s Facebook page out loud in court as evidence. Wilson was sentenced to 21 years in prison and ordered to pay restitution (for more on the story, click here).

Analyzing taxpayers’ social media is just one of a number of ideas the French government is using to tackle tax fraud. The country is also creating a new “tax police force.” It’s all part of a new law passed just a few weeks ago that allows the French tax authorities more options in the fight against tax evasion.

The Internal Revenue Service (IRS) has issued a reminder to taxpayers with an expiring Individual Taxpayer Identification Number (ITIN) to submit their renewal applications. Failing to renew an ITIN by the end of the year will cause refund and processing delays in 2019.

An Individual Taxpayer Identification Number (ITIN) is assigned to a taxpayer who is not eligible to obtain a Social Security Number (SSN). SSNs are generally assigned to United States citizens and those noncitizens who are authorized to work in the U.S. by the Department of Homeland Security. SSNs and ITINs are intended to be used only for tax and benefits purposes, but since banks, schools and insurance companies use them as identification numbers, more folks want them for nontax purposes: Only a quarter of ITINs assigned since the program began in 1996 have been used to file tax returns.

Concerns about misuse spurned changes, including a law that now allows ITINs to expire. ITINs that have not been used on a federal tax return at least once in the last three years are not valid for use on a tax return unless renewed by the taxpayer. Expirations occur on a rotating cycle. That’s why the IRS mailed more than 1.3 million letters to taxpayers who have ITINs with middle digits 73, 74, 75, 76, 77, 81 or 82 this year. Those folks may need to renew.

If you are a taxpayer with an ITIN with middle digits 71, 72, 78, 79 and 80 that has already expired, you will also need to renew your ITIN if you will have a filing requirement in 2019. When you renew your ITIN, you can choose to renew your family members’ ITINs at the same time, even if those ITINs are not yet set to expire. For this purpose, family members include your spouse and any dependents residing in the United States that you will claim on your tax return.

(Remember that there is no personal exemption amount for tax years 2018 through 2025. That means that spouses or dependents outside the United States who would have been claimed for this benefit—and no other benefit—do not need to renew their ITINs this year.)

If your ITIN is not set to expire, or if it has already expired and you do not have a filing requirement, you do not need to take any action.
Similarly, if your status has changed and you are eligible for an SSN, you should not apply for or renew an ITIN.

If you have an expired ITIN, your federal income tax return will be processed, but exemptions and certain tax credits will be disallowed.
You renew your ITIN by completing a federal form W-7 together with the required documentation. You can mail the form to the address on the instructions, work with Certifying Acceptance Agents (CAAs) authorized by the IRS, or call and make an appointment at a designated IRS Taxpayer Assistance Center.

If you need more information, the IRS has several fact sheets available to help, including Pub 5259.

In addition to English and Spanish, you can find Pub 5259 in ChineseKoreanHaitian CreoleRussian, and Vietnamese.

You can find other ITIN-related IRS publications here

The clock continues to tick down for taxpayers hoping to take advantage of the Offshore Voluntary Disclosure Program (OVDP). The Internal Revenue Service (IRS) will close the program on September 28: that gives taxpayers just a few more weeks to apply.

The IRS launched the OVDP in 2009 to encourage compliance with foreign asset reporting. Structured as a tax amnesty program, it allowed U.S. taxpayers to come forward and avoid criminal prosecution for not reporting foreign accounts. That program drew to a close on October 15, 2009. About 15,000 taxpayers took advantage of the program.

Additional filing requirements were written into the Foreign Account Tax Compliance Act, more commonly called FATCA. Failure to comply with FATCA or file an FBAR can result in civil penalties, criminal penalties or both. In response to FATCA, in 2011, the IRS announced a new amnesty program to take the place of the 2009 program. But since amnesty is such an ugly word, the IRS called it “a special voluntary disclosure initiative.” The official title was the 2011 Offshore Voluntary Disclosure Initiative (OVDI).

That year, the number of taxpayer disclosures peaked, when about 18,000 taxpayers came forward. By early 2012, the IRS claimed it had collected $4.4 billion under both programs.

In 2014, the IRS modified the program yet again. At the time of the relaunch, the IRS made it clear that there would be no set deadline for taxpayers to apply for the program. However, the IRS website warned: “[T]he terms of this program could change at any time. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any time.”

That time finally came. In March of 2018, the IRS announced the program would end on September 28, 2018. The IRS claims that since the launch of the program, taxpayers with undisclosed offshore accounts have paid a total of $11.1 billion in back taxes, interest, and penalties. Acting IRS Commissioner David Kautter said about the decision, “Taxpayers have had several years to come into compliance with U.S. tax laws under this program. All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.”

Remember: Simply having assets offshore isn’t a crime, but failing to report them may be. (For more on legitimate reasons to go offshore, click here.)
So who needs to worry? Under current law, U.S. taxpayers must report certain offshore assets. Each “US person” with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in any foreign country must file a Report of Foreign Bank and Financial Accounts (more commonly, FBAR) if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. In other words, if the total of your interests in all of the foreign accounts in which you have an interest reaches $10,000 or more at any point in the calendar year, you may need to file an FBAR. That applies even if you’ve been faithfully reporting the income on your federal income tax return and even if you’ve never, ever repatriated a single dollar to the U.S. It also applies even if the account produces no taxable income. Some exceptions apply (click here for more).

Taxpayers who have not complied still have a few options to play catch-up. According to the IRS, despite the closure of ODVP, the Streamlined Filing Compliance Procedures (SFCP) will remain in place for taxpayers who might not have been aware of their filing obligations. So far, under that program, about 65,000 additional taxpayers have come into compliance.
Additionally, delinquent FBAR procedures and the delinquent international information return procedures will remain available for eligible taxpayers after September 28, 2018. The delinquent FBAR procedures are available to taxpayers who do not need to use either the OVDP or the SFCP to file late or amended tax returns to report and pay additional tax, but who have not filed timely FBARs; taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about the delinquent FBARs are not eligible for the program. The delinquent international information return procedures are available to taxpayers who have not filed one or more required international information returns (such as a form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and have reasonable cause for not doing so; as before, taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about late or missing returns are not eligible for the program.

If those options aren’t sufficient, you may wish to consider the OVDP. To get in under the wire for the OVDP, complete offshore voluntary disclosures must be received or postmarked by September 28, 2018. Partial, incomplete, or placeholder submissions will not be sufficient.

As for those folks who haven’t yet come forward – and aren’t planning to do so? They’re not off the hook. The IRS says that it will continue to hold taxpayers with undisclosed offshore accounts accountable after the program closes.

The Internal Revenue Service has announced that combat-zone contract workers may now qualify for the foreign earned income exclusion.
Typically, if you are a U.S. citizen or a U.S. resident alien, you’re taxed on your worldwide income. However, certain taxpayers can exclude some or all foreign wages from tax under the foreign earned income exclusion. The exclusion is hefty: In 2018, the exclusion can be worth as much as $103,900.
To claim the foreign earned income exclusion, you must have foreign earned income and your tax home must be in a foreign country. Your tax home is where you conduct business or are performing work as an employee and may be different from your family home: It’s not necessarily the same as your residence.

In other words, you must demonstrate that you have established residence in a foreign country for an uninterrupted period that includes an entire tax year; for most taxpayers, that means January 1—December 31. You can leave the foreign country for temporary trips back to the United States or elsewhere for vacation or business, but you must intend to return. In extreme circumstances, you can get a waiver if you don’t stay for the entire year.

You aren’t considered to have a tax home in a foreign country for any period in which your abode is in the United States. “Abode” is a complicated word but is generally defined as “one’s home, habitation, residence, domicile, or place of dwelling.” It is not the same as your principal place of business or your tax home (see IRS Pub 54 for more details).

Under prior law, taxpayers who lived and worked in designated combat zones failed to qualify for the foreign earned income exclusion because they had an abode in the United States. As part of the Bipartisan Budget Act of 2018, contractors or employees of contractors providing support to U.S. Armed Forces in designated combat zones are eligible to claim the foreign earned income exclusion even if their “abode” is in the United States. The foreign earned income exclusion is not available to federal employees or members of the military. However, service members in combat zones may qualify for the combat pay exclusion (more on the combat pay exclusion and other tax breaks for the military here).

The new law applies to tax years beginning in 2018.

The foreign earned income exclusion is not automatic. To claim the exclusion, eligible taxpayers must file a U.S. income tax return together with a federal form 2555, Foreign Earned Income (downloads as a PDF). And no double-dipping: If you opt for the exclusion, you may not claim any other exclusion, deduction or credit related to the excluded income.

For more information about claiming the exclusion, check with your tax professional.

The 2018 FIFA World Cup will come to an end on Sunday when Croatia faces France in the final. The soccer tournament, held in Russia, saw 32 national teams compete on a world stage (31 qualifying teams and the host team) over a month’s time.

Each team brought a squad of 23 players to the tournament. While some of the players were already household names all over the world (think Neymar, Messi, and Ronaldo), others were not as well known outside of their home countries until now, like goalkeepers Danijel Subašić (Croatia) and Igor Akinfeev (Russia).

The well-known faces tend to sport healthy salaries and big endorsements. Messi and Ronaldo landed at #2 and #3, respectively, on Forbes’ highest-paid athlete list, bringing in more than $100 million each. Lesser known players can bring home substantially smaller salaries, depending on where they play and where they live.

Over the past few years, the amount of money that some players pay in taxes – or didn’t pay in taxes – has made the news. (You can read about World Cup soccer players who have been caught up in tax scandals here.)
But exactly how big a bite does the taxman take from players? Depending on the country, top tax rates can range from 13% to over 50%. Here’s a glimpse at the top tax rates for each of the countries in the Round of 16:

A quick peek at the tax rates by country as a bar graph is as follows:

Or here, by number:

  • France (45%)
  • Argentina (35%)
  • Uruguay (36%)
  • Portugal (48%)
  • Russia (13%)
  • Spain (45%)
  • Croatia (36%)
  • Denmark (55.8%)
  • Brazil (27.5%)
  • Mexico (35%)
  • Belgium (53.7%)
  • Japan (55.95%)
  • Sweden (61.85%)
  • Switzerland (40%)
  • Colombia (33%)
  • England (45%)
  • ** U.S. rate for comparison (37%)

(Data was sourced from the Organisation for Economic Co-operation and Development (OECD), individual country revenue sites, and Trading Economics. There may be slight differences between sources – so keep reading.)

There are a few things to note. One, these figures reflect the top tax rates which may reflect the rates paid by soccer stars, but may not, depending on factors like residency (not all players live and work in their home country) and type of income (image rights might be taxed differently than salary, for example).

Top tax rates represent the amount that you will pay on the next dollar of income, but not necessarily the rate that you’ve paid on all income, depending on the tax system. The U.S. income tax system is progressive which means that the rate of tax increases as income increases (more on that here). If you’re single, you pay the same 10% on the first $9,525 as every other single person. Then, you pay 15% on the next $27,000 and 25% on the next $50,000 – the same as every other single person. You only pay the top rate (37%) on income over $500,000. So while the top tax rate is 37% in the U.S., the blended, progressive rate is smaller.

But not all countries have a progressive system: Russia, for example, has a flat tax (even though the country considered a change to progressive taxes as recently as 2014). That means that the same rate applies to all income from the bottom to the top.

Not all income is the same; some may be tax-favored. Capital gains, for example, may be taxed at lower rates even when they are generated by high-income taxpayers. Some countries allow lower tax rates for royalties or image rights, while others, like Russia, may boost rates for certain kinds of unearned income. Still, other income may be sheltered, subject to special tax treaty rules or eligible for an exception (remember the “Beckham law” in Spain?).

In some countries, excise and social taxes are combined to produce the top rate. Following the OECD’s lead, the figures in the charts above generally don’t include those “extra” or all-in taxes, though sometimes they are difficult to segregate. It’s easier to peel away in a country like the U.S. where the top tax rate (37%) reflects an income tax rate which is separate from other taxes like Social Security and Medicare or the Net Income Investment Tax.

Top national tax rates typically don’t include state and local taxes. In the U.S., those can vary, but often add up to less than 10%; some exceptions exist like those 13.3% rates for high-wage earners in California. However, in some countries, state and local taxes can make up a significant chunk of taxes payable: In Sweden, for example, rates can top 30%.

Finally, keep in mind that these tax rates don’t include other taxes like real estate, sales, and property taxes. Those can drive your tax burden up – or down – depending on where you live and work. Property taxes, for example, tend to be twice as high in the U.S. as in other OECD with respect to tax collections, while our sales taxes are often less than the VAT (value-added tax) in many countries.

So where does the U.S. fall in the grand scheme of things? (And no, that’s not throwing shade at our men’s team.) The average tax rate for OECD member countries is around 40%. Sweden has the highest tax rate in the OECD, followed by Denmark and Japan (all of which made an appearance in the Round of 16) with rates over 50%. You can see how the U.S. measures up to other OECD countries, including the OECD average, as a share of gross domestic product (GDP) here. (Spoiler alert: Only Chile, Ireland, Korea, and Mexico ranked lower than the U.S. as a percentage of GDP.)

Differences in tax rates can reflect a host of issues, sort of like how your interpretation of a soccer penalty can be influenced by the angle and the player. That’s why an exact tax rate for one country can vary from source to source, just like a referee’s call, even when the answer seems clear and obvious. Taking all of that into consideration, the tax rates listed here should be enough to give you an idea of the top tax rates in your favorite World Cup countries. Enjoy the final!

In the past, I’ve joked about Congress imposing a tax on text messages and email, but a tax on social media is no joke: It’s happening in Uganda. On May 30, 2018, the Uganda Parliament approved a tax on access to over the top (OTT) services on Telecommunications Service Operators, more commonly referred to as the use of social media.

The tax of 200 Uganda shillings per day – the equivalent of just over a nickel a day in the United States – is targeted to those who use social media platforms like Facebook, Twitter, and WhatsApp and was effective as of July 1. The annual cost works out to 73,000 shillings ($19 US). To put that in perspective, a 2017 study by the Uganda Bureau of Statistics (Ubos) found that the average annual income is about 4,992,000 Uganda shillings ($1,287 US).

The purpose of the tax is ostensibly to raise revenue, but critics argue that it is an attempt by President Yoweri Museveni, who has served as President since 1986, to squelch criticism of his policies. Museveni has previously spoken out against those who use social media to spread “lugambo” (gossip) which he described as “opinions, prejudices, insults [and] friendly chats.”

The tax, which is imposed on “voice and messaging over the internet” must be paid before users can access social media sites. Notices have already gone out to consumers.

To get around the tax, some users are connecting to websites via a Virtual Private Network (VPN) connection. By using a VPN, a user can connect to a server in a different location, making it appear that the user is in the same area as the server rather than where they actually are. So, if a user in Uganda connects to a VPN in, say, the United States, it appears that the user is connecting from the United States.

Legal efforts to stop the enforcement of tax have already started. A petition in protest of the tax has been filed with the Constitutional Court of Uganda. Daniel Bill Opio, a tech lawyer and Executive Director of Cyber Law Initiative, a nonprofit organization focusing on the interaction of technology with the law, has rallied a team to petition the court. According to Opio, the government has pushed the tax by arguing that it “will reduce rumors or idle talk by Ugandans online.” Opio says, in response, that “[w]e have issues with that tax because it’s discouraging net neutrality, open access to internet and violates quite a number of rights and freedoms such as freedom of expression under Article 29 of the 1995 Ugandan Constitution among others.”

Opio and his fellow petitioners are asking the court to declare the law unconstitutional. In his affidavit filed with the court, Opio notes that:

social media platforms such as; Twitter, YouTube, Facebook, WhatsApp Messenger, Instagram and others have revolutionized every aspect of human endeavor through democratization of internet, and online information access, and digital expression through various online fora.

He further argues that:

the same rights that people have OFFLINE like freedom of expression and access to information must also be protected ONLINE, regardless of media of one’s choice.

You can read the petition, as filed, here (downloads as a PDF).

Silver Kayondo, a lawyer focusing on legal and regulatory mandates for emerging technologies such as financial technology (fintech), blockchain, and artificial intelligence (AI), is also a petitioner in the matter. Like Opio, his primary objective is to nullify the OTT tax, and make the Court order the Uganda Communications Commission (UCC), the Telecoms sector regulator to enact Regulations for OTTs so that they can pay the tax directly to the Ugandan government. Kayondo says that “Regulations should also address quality of service, skills transfer, local content, consumer protection, technology transfer, rural infrastructure development, dispute resolution, etc.”

In his affidavit filed with the court, Kayondo argued that the taxation of these services “will lead to geo-blocking and/or throttling of OTT services thus offending the “open internet” principle, which is a fundamental network neutrality principle set by internet standard setting agencies like the Internet Engineering Task Force (IETF) and the Internet Society (ISOC), which require information across the World Wide Web (WWW) to be equally available to all users without variables that impede equal access, digital inclusion, open web and application/app standards, and democratization of the internet.” He called the tax “arbitrary, harsh and oppressive to the double-taxed Ugandan consumers of OTT services at the expense of OTT companies that earn billions of revenue globally from providing OTT services.”

Opio is aware of the role that politics can play in these kinds of cases but he remains optimistic, telling me, “I believe we will win the case.” The fight, however, is far from over. The next step, he says, is to get a hearing date, which he hopes to have before the close of the week. Kayondo explained that they will ask for an expedited hearing since the case “raises matters of great public interest.”

The petitioners are gearing up for what is sure to be a challenging legal fight. Opio acknowledges that courts have been reluctant to take up such matters, hiding under what he calls the “political question doctrine” but he doesn’t think this will be the outcome here. Kayondo agrees, noting that even members of Parliament are backtracking on the tax as the various unintended consequences are becoming clear.

Opio says that there are advocacy plans to push the cause further. As part of the effort, Cyber Law Initiative has set up a trust fund to help with their case: You can find it here. For more, you can follow their progress on Twitter @Cyber__Line. The social media hashtag for the movement is #ThisTaxMustGo.

Realizing that more work is needed to combat global crimes, leaders of tax enforcement authorities from five nations announced that they have created a united operational alliance, the Joint Chiefs of Global Tax Enforcement, known as the J5. The J5 consists of criminal intelligence communities from Australia, Canada, the Netherlands, the United Kingdom and the United States who are committed to collaboration in the fight against international and transnational tax crime and money laundering. Membership of the J5 includes the heads of tax crime and senior officials in tax agencies, including Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Fiscale Inlichtingen-en Opsporingsdienst (FIOD), HM Revenue & Customs (HMRC) and Internal Revenue Service Criminal Investigation (IRS-CI).

The purpose of the alliance is to grow international crime enforcement by sharing information and intelligence, enhancing operational capability by piloting new approaches, and conducting joint operations to bring those who enable and facilitate offshore tax crime to account.

Specifically, the group says:

We are convinced that offshore structures and financial instruments, where used to commit tax crime and money laundering, are detrimental to the economic, fiscal, and social interests of our countries. We will work together to investigate those who enable transnational tax crime and money laundering and those who benefit from it. We will also collaborate internationally to reduce the growing threat to tax administrations posed by cryptocurrencies and cybercrime and to make the most of data and technology.

The J5 was formed in response to a call to action from the Organisation for Economic Co-operation and Development (OECD) for countries to do more to tackle the enablers of tax crimes. The J5 will work with the OECD and other countries and organizations where appropriate. The initial focus will be on operational aspects of tackling financial crimes, including sharing best practices and intelligence leads, as well as conducting cases together.

The group will also use new methods to track cryptocurrency used in the commission of a crime. Finally, the group will have practices in place so that if a new data breach occurs or if a set of relevant documents is released, a structure will already be in place to address it.

Why now? Don Fort, Chief of IRS-CI, said:

We cannot continue to operate in the same ways we have in the past, siloing our information from the rest of the world while organized criminals and tax cheats manipulate the system and exploit vulnerabilities for their personal gain. The J5 aims to break down those walls, build upon individual best practices, and become an operational group that is forward-thinking and can pressurize the global criminal community in ways we could not achieve on our own.

The first meeting of the group was held last week. At the meeting, the group developed tactical plans and identified opportunities to pursue cyber-criminals and those who enable transnational tax crimes. Further updates on J5 initiatives will be announced in late 2018.

Earlier this week, the world turned its eyes to North Korea as President Trump met with the country’s leader, Kim Jong Un, in Singapore. Part of the fascination may be because so little is known about North Korea. Here’s a brief look at the country’s history, economy—and why the government claims its people don’t pay taxes.
Contrary to what many folks believe, the division between the Koreas didn’t happen as a result of the Korean War. The schism occurred years before that. In 1910, Japan moved into the Korean peninsula as part of its colonization efforts and ruled the country for decades. After Japan’s defeat in World War II, the United States and the then Soviet Union divvied the peninsula up into north and south factions. The divide was at 38 degrees north latitude, better known as the 38th parallel.
In 1948, the southern part of the peninsula, backed by the United States, became the Republic of Korea, more commonly called South Korea. The northern part of the peninsula, supported by the Soviets, became the Democratic People’s Republic of Korea (DPRK), more commonly called North Korea.
One problem remained: The new governments each believed that they should control the peninsula. North Korea jumped first, and in 1950 they invaded South Korea. The result was the Korean War, which lasted until 1953. Eventually, the two Koreas reached an agreement with borders that largely mirrored their previous stance along the 38th parallel (the two countries later agreed to pursue a peace accord as part of the Panmunjom Declaration signed in 2018).
After the war, North Korea was ruled by Kim Il Sung, the same leader that the Soviets had installed in the 1940s. Under Kim Il Sung, North Korea became increasingly isolated from the rest of the world. The government kept a tight leash on its people, restricting travel and press, and regulating the economy.
As part of the restructuring, in 1974, direct taxes such as income taxes were officially eliminated. The move wasn’t considered to be an economic decision since by that time the government already controlled much of the wealth. So why the strike? Outsiders considered it propaganda, believing that it was intended to demonstrate that the country could support its people. Indirect taxes and user fees, however, remain in place to this day.
Two things happened in the 1990s that would further shape North Korea: The collapse of the Soviet Union in 1991 and the death of Kim Il Sung in 1994. With China as its only real ally, North Korea’s economy and its position in the world was declining. Kim Il Sung’s successor, Kim Jong Il, responded initially by taking steps to strengthen the state, including building up the military. Eventually, however, the lack of economic opportunity was too much for the country to manage, and Kim Jong Il accepted financial and other aid from South Korea as part of the so-called “Sunshine Policy.”
Unfortunately, it wasn’t enough. In 2009, North Korea announced that it would redenominate its national currency, the won. With redenomination, the face value of the currency is changed, typically in response to inflation. In this case, the government limited available won that could be exchanged for new currency, causing a bit of a financial panic. The efforts didn’t stabilize the economy, which wasn’t surprising to those who considered it not so much response to inflation but an attempt by the government to control the markets and limit growth in the independent sector.

Things would take an even more sour turn when North Korea ramped up its nuclear efforts. The country withdrew from the Nuclear Non-Proliferation Treaty (NPT), causing concern in the west. Those fears escalated in 2013 after Kim Jong Il died and Kim Jong Un ascended to power. Kim Jong Un took steps to establish himself as the “supreme leader” of the country, reportedly offing his uncle and nominal regent, Jang Song Thaek. The following year, the United Nations published a report which claimed that “systematic, widespread and gross human rights violations have been and are being committed by the Democratic People’s Republic of Korea” and that “[i]n many instances, the violations found entailed crimes against humanity based on State policies.” (You can read the report, which downloads as a pdf, here.)
As Kim Jong Un consolidated power inside the country, he also boosted the profile of the military. That was most clearly demonstrated with increased efforts to build and test nuclear weapons, which drew the ire ofother countries, including the United States and its primary trading partner, China. That resulted in trade sanctions and resolutions from the United Nations Security Council, including those targeting the country’s foreign currency earnings.
Despite economic pressures, North Korea touts itself as the only tax-free country in the world (though rumors abound that could be changing). That’s because North Korea’s people typically still don’t pay direct taxes. However, there are still some taxes paid: The government just doesn’t call them taxes. Those taxes, which tend to be user fees and value-added-type taxes (similar to our sales taxes) make up 11.4% of the country’s gross domestic product (GDP), on par with countries such as Guatemala, Central African Republic and Bangladesh. Keep in mind that number is a little misleading, though, because it excludes earnings from state-operated enterprises.
As the country remains isolated, its economy remains largely unchanged. In 2015, the North Korea’s GDP purchasing power parity, or value of all final goods and services produced, was estimated to be $40 billion. To put that in perspective, the GDP purchasing power parity for the top three economies was:

  1. China: $23.1 trillion
  2. European Union: $20 trillion
  3. United States: $19.4 trillion

South Korea’s GDP purchasing power checks in at $2 trillion.
The per capita GDP in North Korea is estimated to be $1,700. According to a 2017 report on the State of Food Security and Nutrition in the World, 10.3 million people in the country—nearly half of the population—are undernourished, a problem that the World Food Program says has been triggered by weather-related droughts and “compounded by political and commercial isolation.” By comparison, the GDP per capita for the United States is $59,500.
Today, the Central Intelligence Agency fact book claims that North Korea has “one of the world’s most centrally directed and least open economies.” Trade remains restricted and the country “does not publish reliable National Income Accounts data.”