FATCA moves forward with more foreign banks on board
The Foreign Account Tax Compliance Act (FATCA) has been deeply controversial ever since it was passed by Congress in 2010.
It has taken a long time for the new law’s implementation to take shape. The challenges have been many. As we discussed in our September 6 post last year, this has included the renunciation of U.S. citizenship by many U.S. taxpayers opposed to or overly burdened by the new offshore account enforcement requirements.
In this post, we will take note of one of the latest developments in the ongoing story of FATCA implementation: an announcement by the U.S. Treasury that it has enlisted tens of thousands of foreign banks to provide information to U.S. authorities about the offshore accounts of U.S. taxpayers.
U.S. authorities are concerned that taxpayers sometimes do not disclose these accounts to the IRS and try to evade taxes on them.
Around the world, however, there has been a lot of concern that U.S. demands for disclosure undercut the sovereignty of other nations. This has been particularly true in Switzerland, with its historic traditions of banking privacy.
But U.S. authorities have kept trying to enlist foreign financial institutions in the offshore enforcement crackdown. The U.S. Treasury says that more than 77,000 of these institutions have now agreed to share financial information about their account holders with U.S. authorities.
Obviously that is a big number. It even includes more than 500 Russian banks and other financial institutions. The Russian banks made their agreements directly with the IRS.
This was because the U.S. suspended negotiations for an intergovernmental agreement with the Russian government about information sharing. The U.S. took this step in response to Russia’s role in the crisis in Ukraine.
In short, FATCA – after years of controversy and criticism – is still moving forward. And the implications for offshore account enforcement loom large. Information sharing by foreign banks with U.S. authorities could put further pressure on U.S. taxpayers who have not made required offshore account disclosures.
Source: USA Today, “Tax evasion crackdown: Foreign bganks share info,” Stephen Ohlemacher (AP), June 2, 2013