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US emerges as new Swedish 'tax haven'

US emerges as new Swedish 'tax haven'

Published: 19 Jan 2011 11:42 GMT+01:00
Updated: 19 Jan 2011 19:17 GMT+01:00

Swedish taxpayers looking to shield earnings from the country's tax authorities may have an unlikely tax haven at their disposal across the Atlantic: the United State.

While Sweden and the United States have a tax treaty obligating the tax agencies in both countries to exchange information with each other, the Swedish Tax Authority (Skatteverket) hasn't received any information from its US counterpart since 2005.

As a result, Swedish tax authorities have been unable to cross-check information about income earned in the United States for the last five years, leaving the door wide for companies and individuals based in Sweden to cheat on their Swedish taxes.

Between 2001 and 2004, Sweden received information on 60,000 Swedish taxpayers who had earned a total of 48 billion kronor ($7.2 billion) in the United States, Sveriges Television (SVT) reported on Tuesday.

According to SVT, the United States stopped sending tax information to Sweden because a subcontractor used by the US tax agency, the Internal Revenue Service (IRS), processed the data in a way the made it impossible to differentiate between companies and individuals, thus rendering the information useless.

Despite going without data on Swedish taxpayers US-based earnings for more than five years, the Swedish tax agency has yet to take action.

Neither Sweden's Ministry of Finance nor US authorities have been contacted about the matter.

"We can't request that the hand over the information," the agency's Susanne Lindblom told the TT news agency.

The Swedish Tax Agency estimates that international tax fraud costs Sweden 46 billion kronor per year. However, the cross-checking international filings is not the most important tool for bringing tax cheats to light.

"From the income declaration side, it's about 35 million kronor that we check and which gets caught through back taxes," said Lindblom.

Chris Dunnett, press officer with the US embassy in Stockholm, said the issue had not previously come the embassy's attention, but he said the IRS had now been informed and was looking into the matter.

"It's important to emphasise that, whatever is going on, it isn't something that's being done on purpose," he told The Local.

Later on Thursday, the Swedish Tax Agency issued a statement clarifying the information in the SVT report, explaining that the agency had in fact received information from United States for the 2005 and 2006 tax years, but that it had arrived after the publication of an internal analytic report which served as the basis for the SVT report.

However, the statement made no mention of the agency having received any information from the United States from 2007 onwards.

Swedish tax authorities added that exchanging tax information between countries is a complicated task and that the system is “still under construction”.

Nevertheless, Lindblom issued a warning to anyone looking to take advantage of the slow pace of information flow from the US to Sweden.

“We can uncover tax cheating and correct tax filings after the fact even if we’re lacking control information at the time of the filing,” she said in a statement.

“Sweden and other Nordic countries are ahead of the pack and have gone further than many countries in exchanging and handling tax filing information.”

According to the Swedish Tax Agency's statement, the United States sends information on fewer than 20,000 tax filings annually and more than 90 percent of them concern financial transactions between companies and banks where the likelihood of irregularities is relatively small.

“We’re now going to carry out a more thorough review of which information still hasn’t come into our system and contact the United States and the other countries for which we still lack information from certain years,” said Lindblom.

The current tax treaty between the US and Sweden went into effect in 1996, and was amended in 2005 to eliminate source-country withholding taxes on certain intercompany dividends and certain dividends paid to pension funds.

TT/David Landes (news@thelocal.se)

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Your comments about this article

12:26 January 19, 2011 by Roy E
What is described here is hardly a 'tax haven'.

It's just a breakdown in a bureaucratic system that people works to the advantage of the worker for a change.
12:39 January 19, 2011 by Rishonim
Yellow journalism on part of TL. I could name 30 tax haven and the USA does not appear anywhere close. What a great deal of balderdash!
13:00 January 19, 2011 by conboy
Good article!
13:13 January 19, 2011 by UScitizen
Funny how all you Swedes who hate America aren't jumping on this. I guess maybe you, your family members, or some of your friends are tax cheaters. Or you'd like to be because you hate the Swedish tax system more.
13:15 January 19, 2011 by jackx123
errr @ rishonim:

If you incorporate a Delaware trust earning revenue outside the the US it's deemed as tax free and at the same time obtains a "legitimate" status by being resident of the US. On the contrary, doing the sam in the channel islands, under European jurisdiction DOES have consequences.

Obviously you need to read up on international tax law - lol
14:23 January 19, 2011 by Strongbow
So the way to exploit this is to travel 5 years into the past and then hope they never invent a way to report historical tax records?
14:30 January 19, 2011 by jwlundgren
that could work out well for Tiger Woods' former wife.
14:36 January 19, 2011 by Zala Russe
I didn't think that the Channel Islands were under European jurisdiction? I need to check this out :)
20:01 January 19, 2011 by mikewhite
Hmm, Sweden is missing a trick here, if my tax records had not been updated for 5 years there would have been someone knocking on my door by now !

Have they been handing over money to the US without getting any back, or has the lack of data halted the cash reconciliation process ? There are too many unanswered questions from the article.
22:04 January 19, 2011 by Strongbow
This is probably the same as the harassment Skatteverket does to Björn Borg. According to them every swede that lives more than half the year in Sweden must pay Swedish tax for all incomes of the year, even abroad. They've chased his tennis earnings and they chase his brand product earnings. http://www.dn.se/ekonomi/skatteverket-nar-ej-borg-pengar
22:44 January 19, 2011 by conboy
Yeah but he puts his name on tacky clothing lines not to mention other lines...
23:35 January 19, 2011 by maxbrando
Einstein's theory of relativity is relevant here. As progressive rates move to 100% (and over), al la Ingmar Bergman, the MAXIMUM tax rate in America of 39% becomes more attractive/relevant. This is why every Swedish personality of the 20th century left Sweden and moved to Monaco (?), USA (?), etc. How many cabbages fall off the back of the truck before you guys get it?
05:19 January 20, 2011 by Darwinder
Sweet, finally something useful on the Local!
07:57 January 20, 2011 by theTRUTH4u
There is something else missing in the big picture - the IRS and Skatteverket are chasing the big boys with the big bucks!

It's too big of a loss to see ABBA and BB and Ingemar Stenmark make millions for themself while branded as Swedes and not living up to our tax system.

What about little John Jones who runs a little company to pay his bills and might have some online account in the US and transfer some money through his US bank accounts and PayPal. Do you think IRS has time to chase down the million individuals that do that just because they have to give their Tax ID when you set up an account?
09:21 January 20, 2011 by kcussmilsum
Sweden...

First a Safe Haven.

Now a Tax Haven.

What's Next?
10:43 January 20, 2011 by bob3000
Taxes, Death and Trouble.

Unless you have/had a professional wealth adviser, who knew the reports were in the wrong format - you could not have benefited from this. (like the comment about the timemachine). But...

You rarely escape the juggernaut.

You diligently fill in your tax forms and pay the declared tax. Knowing that eventually the tax office will call you, if you misfile.

The US will now reformat the data - Skatteverket will get the info - then 5 years of data will be processed and people will be called, lawyers engaged - payments made.

With the US paranoia about money trafficking, they will be happily to co-operate with Skatteverket.
12:40 January 20, 2011 by Strongbow
DN.se reported yesterday that they found the reports for 2005 and 2006 (laying around?) so the exploit is shrinking. http://www.dn.se/ekonomi/fler-kontrolluppgifter-fran-usa
04:30 January 21, 2011 by theTRUTH4u
the US is very very busy crashing the dollar and pointing the finger to the rest of the world.

they are cutting funds to support the school system, cutting funds to support police and firemen and even the "correction officers" that are watching all the created cims that are locked up.

as late as today, there are threats from the unions that Obama better follow thorugh with the plans to not allow tax deductions anymore for your mortgage, as the union workers are afraid they won't get their next pay raise, while the nation is at 10% unemployment.

there are predictions that about 5 MILLION more houses will go into foreclosure this year. Where will all those familes go? Camping at Wallmart's parking lot?

What is deceptive is that all this is CREATED and intentionally planned.

soon there will be another currency implemented in a national disaster and catastrophe. Google "Amero" and find out that Canada, North America and Mexico are planned to be called then NAU; North American Union.

These are plans that have been going on for a long time and all the noise and ruckus in the everyday news is just a created distraction while they slowly implement their plans.

The Amero will be worth almost nothing and this is the biggest robbery in the history of the planet. Meanwhile they are scrambling to find any more ways to tax everyone and cut deductions.

So next year, instead of writing off the taxes for your interest on your mortgage - HOMEOWNERS ARE SUPPOSED TO PAY ???

It has not even gotten "bad" yet - you can find on the internet how they are advocating stocking up on food and guns and ammunition to protect what you have. Riots are going to happen and it will not be pretty.

IRS wil not have any time to worry over some tax filings ! Got the picture???
16:49 January 21, 2011 by tadchem
bob3000> Do not assume the US will cooperate. US bureaucracy has grown to the extent that its main distinguishing feature is incompetence. That incompetence is the cause of this problem in the first place. At this level the driving motivation of Incometence is to prevent itself from being seen. To cooperate with the Skatterverket would mean revealing that incompetence to bright lights. While remedies may be produced and put in place (in about 5 years) to prevent a recurrence, there will never be any retrospection to recover back taxes.
01:42 January 23, 2011 by BobWas
When you try to open a US bank account now, you are asked for much more information than before.

Even US citizens / residents have to provide official identification with a picture (like a passport / state driver's license), give tax identification information, and that's to a bank you've done business with for years.

It's not easy for a foreigner to open a US bank account. All that added work is to provide a paper trail if / when terrorists use the US banking system.
06:30 January 23, 2011 by theTRUTH4u
Have you also noticed if you are creating a website and work on setting up some affilate accounts? To make a few dollars they want to verify everything with scanned copies of bank statements, your driver's license and verify your PayPal account.

You can't register a domain name without a credit card and you are on the map right away and can be tracked down in any corner of the world!
11:10 January 25, 2011 by bob3000
@tadchem

Don't bet on it.
23:51 January 25, 2011 by dunce
The top priority for the USA IRS is collecting revenue for itself. Other countrys are lower. When contracts are put out for bid, the specifications are very detailed. They got just what they asked for. It may be that some things were added at cross purposes because of an effort to tract terrorist funds flow.These may be disguised as normal business transfers. Blundering bureaucrats are the bane of every government and the rule rather than the exception.
11:21 January 26, 2011 by theTRUTH4u
It's actually amazing how corrupt the US government is - they are selling weapons to the Mexicans, and watch the gangs kill each other and the boarder police who is also currupt. They can't resist taking the payoffs and go "bad" and get caught up in the drug trafficing. They should just legalize pot and the endless manslaughter and war would be over.

Check this out!

youtube. com/watch?feature=player_embedded&v=p9M0Ckt0Yws
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