Litigation

Privacy over regulation

By Tracy Coenen

Today I was in a class on overseas banking and reporting requirements for individuals and businesses. I wanted to learn about the latest regulations and their enforcement. We discussed the Offshore Voluntary Disclosure Program, through which taxpayers can “tell on themselves” to the IRS regarding their previously secret foreign bank accounts. The will not be criminally prosecuted, and will have to pay a penalty of 20% of the value of their offshore accounts.

Taxpayers who don’t participate in voluntary disclosure but are later discovered to have secret foreign bank accounts are subject to much stiffer penalties and the threat of criminal prosecution.

Sounds great, right?

Or so the half of the class who were law enforcement officers. I raised the issue of cost versus benefit, and the severe privacy implications for all of us.

First, cost versus benefit. There are zillions of forms that banks and other businesses must fill out to comply with the regulations, including Cash Transaction Reports (CTRs), Suspicious Activity Reports (SARs), Foreign Bank and Financial Account Forms (FBARs).. These are just the tip of the iceberg.

Not only does someone have to fill out these forms, some government employee has to look at them. We were told that over a million SARs were filed last year, and someone had to look at all of them.

The is obviously a massive cost that goes into looking at these. Their primary use seems to be by the Internal Revenue Service, and supporters of this enforcement activity say that their work brings in far more than their cost, so it’s worth it.

Should we want the IRS to be collecting as much of our money as possible? I’m all for people paying their fair share, but at what point do we tell the IRS to stop and leave taxpayers alone? The enforcement activities don’t just hurt the naught tax evaders. They also spill over to ordinary people who make mistakes, don’t understand the law, or have situations which cause them to underpay their taxes. Woe is you if you are on the receiving end of any sort of enforcement action.

And then there are the privacy implications. It’s bad enough that taxpayers live daily with the threat that you are guilty if the IRS says you are guilty, and you have the burden of proving yourself innocent. (Yes, it’s guilty until proven incident.) There are massive privacy issues for all of us.

Do we want our government collecting all of this information? The law enforcement officers say it’s necessary, and say that the collection of this data aids in criminal investigations. They cite terrorism… a word that surely gets many dissenters to change sides. After all, who wouldn’t be in favor of reducing terrorism???

While I generally think that enforcing the law is a good thing, our government has gone too far. Our government needs to get out of our lives. The “Big Brother” atmosphere is progressively getting worse. I’m not breaking any laws, but I don’t want my government collecting all sorts of information (financial and otherwise) on me. Why not? Because it’s none of their business. It’s private!

Even the fear that criminals are committing crimes is not enough to make me want our government to be watching me at all times. Our country was founded on freedom. Of course we need certain laws and regulations in place so that we have order and civility. But our government has grown to massive proportions and they are dictating too much of our lives.

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Full post as published by The FRAUDfiles Blog on July 13, 2009 (boomark / email).