Court Grants DOJ/IRS "John Doe" Summons for First Data Customers
Tax Day marked a small victory for law-abiding taxpayers who are tired of subsidizing those who evade their taxes. On April 15, the U.S. District Court for the District of Colorado granted the government permission to serve a "John Doe" summons on First Data Corporation. The Department of Justice (DOJ) had requested the summons in connection with an Internal Revenue Service (IRS) investigation of offshore tax evasion.
First Data, formerly part of American Express, is a payment card processor. It processes credit and debit card transactions for merchants and deposits the funds in merchant bank accounts. The IRS is seeking information on any merchants who have their payments directly deposited in an offshore bank account. It suspects that Americans with business in the U.S. are using payment card processors to send their income out of the country to tax havens, where it can go undetected (and untaxed) by the IRS.
The amount of tax revenue lost each year due to offshore tax evasion is estimated to be around $100 billion. Because of the tax havens' bank secrecy laws, it is almost impossible to get information on these accounts. The IRS usually can't get any answers from the foreign government unless it can identify a particular tax evader. But without knowledge of the offshore accounts, the IRS doesn't know who those taxpayers are. The ability to use a "John Doe" summons is critical to the agency's search for tax cheaters.
The IRS would have an easier time getting these summonses approved by courts if Congress adopts the "John Doe" Summons provisions of the Stop Tax Haven Abuse Act which was introduced by Sen. Carl Levin (D-Mich.) and Rep. Lloyd Doggett (D-Texas) last month. As tax haven legislation moves through Congress, we encourage lawmakers to be sure this provision is included.