The U.S. Treasury Department continues to move forward on trying to get foreign governments to provide more information about Americans with foreign accounts.
Treasury says it is merely implementing the Foreign Account Tax Compliance Act (FATCA), which Congress passed in 2010. To many commentators, however, these efforts often seem like a heavy-handed way to address concerns about tax evasion.
The latest move by Treasury came last week, when it announced a deal with Japan and Switzerland regarding FATCA compliance. This goes along with agreements previously reached with five major European countries: France, Germany, Italy, Spain and the United Kingdom.
The agreements concern the sharing of information between governments, as called for under the FATCA law.
Financial institutions in the countries that have reached such agreements with the U.S. would provide information about American accountholders directly to the IRS.
The foreign banks will face significant financial penalties if they do not comply with the new information-sharing requirements put in place by FATCA, once those requirements take effect next year.
The Treasury Department is currently working on detailed rules to implement the requirements. As things stand now, foreign financial institutions would have to begin reporting the identities and account balances of U.S. accountholders beginning in 2014.
Treasury says it will be finalizing these rules by this fall.
How the law will really work in practice, though, still remains untested. Critics have questioned the new law, saying that over-aggressive enforcement could add substantial transaction costs. These costs, in turn, could harm the global economy.
Source: “”Treasury hammers out tax-evasion agreement with Japan, Switzerland,” The Hill, Peter Schroeder, 6-21-12