Nearly half of the 49 hedge funds that were domiciled in the US Virgin Islands have left in the past two years following a crackdown on tax evasion by the Internal Revenue Service (IRS). The IRS suspects “rampant fraud,” according to a Bloomberg News report.
It seems US citizens who actually lived in the United States were claiming Virgin Islands residency. A Massachusetts insurance executive was charged with tax evasion, prompting Iowa Senator Charles Grassley to push the US Treasury Department to investigate.
A new IRS form now requires fuller disclosure from people claiming residency in the territory, says the report. Grassley pushed for a law that imposes a six-month residency requirement and applies tax benefits only to income earned within the territory.
The rumpu is understood to have encouraged people and businesses to leave the islands, including 23 hedge funds.