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Arielle Borsos and Charles Ruchelman Comment on Dutch Request for John Doe Summonses

April 6, 2017, Tax Notes

A recent decision by a federal court authorizing the IRS to issue John Doe summonses to American Express on behalf of Dutch tax authorities is an indication that the U.S. is willing to cooperate with other countries and could help offset some of the negative press that has identified the U.S. as a tax haven, practitioners say.

. . .

Arielle Borsos of Caplin & Drysdale said the Justice Department, which has aggressively sought financial information on U.S. residents it suspects of evading U.S. tax laws from other countries, is committed to reciprocating. "The United States wants to enforce its laws and needs cooperation from other countries, and so here they’re providing assistance to other countries to facilitate this kind of relationship in the future," she said.

Borsos said the request by the Netherlands follows a court authorization in 2013 allowing the IRS to issue John Doe summonses on behalf of Denmark. “The Norway case was interesting because it was the first time we saw the use of a John Doe summons on behalf of a treaty partner to assist the treaty partner in preventing evasion of its own tax laws,” Borsos said. "This one is similar. It seems that the United States might be issuing these more frequently down the road.”

Challenge Unlikely

Unlike countries such as Switzerland, where a financial institution has a legal requirement to inform customers in advance that a foreign country has made a request for their bank records, Borsos said it appears that American Express is subject to no similar requirement in the U.S.  “Now that service of the summons has been authorized by the court, it would be up to American Express to determine if it wants to challenge its enforcement,” she said.

One of Borsos’s colleagues said he doubts any challenge, if made, would be successful. “While I am not intimately aware of the facts of this case, the fact that American Express has more than a substantial presence and operations in the United States makes an objection to compliance an uphill battle,” said Charles Ruchelman of Caplin & Drysdale.

To read the full article, please visit Tax Notes’ website (subscription required).

Excerpt taken from the article “Approval of Dutch Request for John Doe Summons Could Soften Negative U.S. Image” by William Hoke for Tax Notes.


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