The Offshore Tax Enforcement Dragnet

79 Pages Posted: 1 Apr 2017 Last revised: 23 May 2018

See all articles by Shu-Yi Oei

Shu-Yi Oei

Duke University School of Law

Date Written: March 30, 2017


Taxpayers who hide assets abroad to evade taxes present a serious enforcement challenge for the United States. In response, the United States has developed a family of initiatives that punish and rehabilitate non-compliant taxpayers, raise revenues, and require widespread reporting of offshore financial information by financial institutions and taxpayers. Yet, while these initiatives help catch willful tax cheats, they have also adversely affected immigrants, Americans living abroad, and “accidental Americans.”

This Article critiques the United States’ offshore tax enforcement initiatives, such as the Foreign Account Tax Compliant Act and the Internal Revenue Service’s offshore voluntary disclosure programs. It argues that the United States has been overly focused on two policy priorities in designing enforcement at the expense of competing considerations: First, the United States has attempted to equalize enforcement against taxpayers with solely domestic holdings and those with harder-to-detect offshore holdings by imposing harsher reporting requirements and penalties on the latter. But in doing so, it has failed to appropriately distinguish among differently situated taxpayers with offshore holdings. Second, the United States has focused on revenue and enforcement, paying less attention to the significant compliance costs and potential social harms that its initiatives create.

The confluence of these two policy priorities risks creating high costs for the wrong taxpayers. While offshore tax enforcement may have been designed to catch high-net-worth tax cheats, it may instead impose disproportionate burdens on those immigrants and expatriates who have less ability to complain, comply, or “substitute out” of the law’s grasp. This Article argues that the United States should redesign its enforcement approach to minimize these risks and suggests reforms to this end.

Keywords: tax policy, tax compliance, international tax, FATCA, Foreign Account Tax Compliance Act, offshore tax enforcement, offshore voluntary disclosure programs, OVDP, Swiss Bank Program, taxpayer rights, international relations, expatriates, immigration

JEL Classification: H11, H20, H21, H22, H23, H24, H25, H26, H27, H29, H87, F02, F50, F53, F59, Z13, E63, H2, K33, K34, N

Suggested Citation

Oei, Shu-Yi, The Offshore Tax Enforcement Dragnet (March 30, 2017). Emory Law Journal, Vol. 67, 2018, Forthcoming, Tulane Public Law Research Paper No. 17-2, Available at SSRN: or

Shu-Yi Oei (Contact Author)

Duke University School of Law ( email )

Box 90360
Durham, NC 27708-0360
United States

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