As the tax filing season approaches, the U.S. government is desperately seeking ways to broaden its sources of income and reduce expenditure in the face of a federal deficit as high as 1.4 trillion dollars.

To this end, closing the taxation loophole has become a matter of prime importance. The foreign media reported on Dec. 26 that the U.S. government is stepping up the tracking of the overseas accounts and foreign assets of its citizens. Those found to possess hidden overseas assets will face heavy penalties. The new investigative measure serves a double purpose. It will not only increase revenue, but also help narrow the wealth gap.

Last week, the U.S. Internal Revenue Service (IRS) announced part of the implementation details of the Foreign Account Tax Compliance Act (FATCA). Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS. In addition, FATCA will require foreign financial institutions to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold substantial interests.

Experts assert that the move by the U.S. government will greatly affect those of Chinese origin. Today, Chinese Americans make up the largest Asian population in the U.S., totaling 2.5 million and they generally maintain financial connections with their ancestral home. The determination of the U.S. government to thoroughly investigate the ownership of overseas assets has resulted in many U.S.-based Taiwanese relinquishing their U.S. citizenship or green cards to save their assets in Taiwan.

According to the New York Daily News website, the U.S. government's requirement that foreign banks should provide U.S. citizens' account information will make it even more difficult for U.S. citizens looking to open overseas investments or saving accounts.

If China adopts the U.S. method, will it help to cool the immigration fever of rich Chinese? There are reports that more than 60 percent of wealthy Chinese want to immigrate to other countries, with many looking to go to the U.S. The U.S. government's new measure reminds people that, "immigration has risks and it's better to act with caution."

According to the report titled "2011 China Private Wealth Management White Paper", 14 percent of wealthy people (with assets of 10 million yuan or more) are now busy with immigration applications, and half of them are planning to settle abroad. One third already have overseas investments. The report reminds us that China is not immune to the tax flight phenomenon.

Whether or not the Chinese government should tax the overseas assets of its rich citizens is something which must be fully discussed. The Chinese government should also carefully examine the source of wealthy Chinese citizens' overseas assets to ensure their legality. Of course, these investigations should be carried out by transparent, legal means.

Some people believe that we should take measures to prevent tax fraud first and only then consider taxing the overseas assets of the rich. In fact, both measures can be taken simultaneously. Some people may argue that taxing the overseas assets of the rich is no easy matter because China is not the U.S. It can't act like the U.S. in terms of forcing global financial institutions to cooperate with its taxation program. However, with perseverance, we will find ways to solve the problem.

The bigger concern is, once China taxes the overseas assets of the rich, will it speed up the immigration rate of the wealthy? Will it hurt China's attractiveness to overseas talent? I believe there may be some impact. But nothing is more meaningful than taxing the overseas assets of the rich, as this will not only increase the tax base and narrow the income gap, but also prevent the illegal transfer of assets.

As we all know, officials are among China's rich overseas asset holders. Some "assets" are state-owned assets that were transferred out illegally and it is rumored that their value is considerable. Such rich people and assets deserve to be thoroughly investigated.

(This article was first published in Chinese and translated by Li Huiru.)

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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