U.S. Treasury Signing IGAs with Foreign Governments to Combat Offshore Tax Evasion

The U.S. Treasury has signed a number of intergovernmental agreements (IGAs) to combat offshore tax evasion and to comply with the Foreign Account Tax Compliance Act (FATCA). The U.S. has completed agreements with the Cayman Islands, Costa Rica, Denmark, France, Germany, Ireland, Japan, Mexico, Norway, Spain, Switzerland, and the United Kingdom.

Furthermore, the U.S. Treasury is in various stages of talks and or negotiations with other foreign governments such as Bermuda, Italy, Hungary, Malta, Canada, Israel, the Czech Republic and more than 70 other countries.

FATCA requires foreign financial institutions that hold the accounts of U.S. taxpayers to release information directly to the Treasury. If a financial institution fails to release the identity of and to provide information on U.S. account holders, FATCA allows U.S. financial institutions to enforce a 30% withholding tax on payments made to foreign financial institutions.

The IGAs are not just a one-way funnel of information to the Treasury; a number of the foreign governments have tailored the IGAs to meet their specific needs and they require the U.S. to provide information in return.

According to Robert Stack, Treasury deputy assistant secretary for international tax affairs, “the U.S. government’s work with other counties and jurisdictions on the disclosure rules marks the growing movement toward global tax transparency.” Stack further stated that FATCA is recognized for fighting offshore tax evasion and encouraging transparency.