October 30, 2015
A new abbreviation in tax law: CRS, for common reporting standard
Tax law is filled with abbreviations. IRS of course stands for Internal Revenue Service. OIC stands for offer in compromise. FBAR stands for Report of Foreign Bank and Financial Accounts (now also known as FinCEN form 114) and so on.
The newest abbreviation is CRS. (No, not CVS, the national pharmacy chain.) CRS stands for common reporting standard. It refers to the digital exchange of information between tax authorities in the U.S. and other countries to enforce the Foreign Account Tax Compliance Act (FATCA, another abbreviation).
In this post, we will discuss the role that the CRS is expected to play in offshore account compliance.
The Wall Street Journal reported on the CRS today. The Journal noted that the IRS has already begun digital information-sharing about financial accounts with tax agencies overseas.
A remarkably large number of countries have provided information to the IRS. Perhaps as many as 70 countries have done so. The number of countries to which the U.S. has sent information is not as large, but is still significant.
The fact that the U.S. has been able to enlist such a high degree of participation is pretty surprising, considering all the resistance around the world to FATCA as an American power play. But the sheer audacity of FATCA has made headway around the world. It contains stiff penalties for foreign financial institutions (FFIs) that do not participate in the IRS’s aggressive offshore enforcement effort.
To be sure, these FFIs could decline to do business with U.S. taxpayers. And indeed, FATCA has made it difficult for many Americans living or doing business abroad to find adequate financial services. But the sheer wealth of the U.S. and common concerns about global tax evasion have made many foreign countries enter into intergovernmental agreements (IGAs) with the U.S. to implement data-sharing about foreign accounts.
The CRS will take this data-sharing to another level. Within a couple of years, the CRS will enable participating countries to share tax data electronically with each other. And more than 90 countries have already signed up