The Internal Revenue Service has attained an unprecedented ability in obtaining information. In an article published on Bloomberg, he Richard Rubin dissects the Foreign Account Tax Compliance Act, or FATCA, which gives the IRS the jurisdiction to look at bank accounts and investments U.S. citizens hold abroad. Should foreign institutions refuse to comply, the U.S. government will begin to impose 30 percent taxes on overseas payments. This new encumbrance has upset many foreign banks and U.S. expatriates and has revolutionized the current global standard of bank-to-government information sharing, eliminating many hard-to-trace asset evasions.
Coming into effect July 1, 2014, it is still uncertain how successful this law will be in battling tax evasion, but it still allows the U.S. government to collect data from more than 77,000 financial institutions and 80 governments about its citizens’ overseas fiscal activity. FATCA is legislation that has come in response to the inability of federal tax authorities to obtain transparent information about financial accounts that U.S. citizens have outside the country. The United States taxes its citizens on their international income regardless of where they actually reside.
In many cases, foreign banks are hesitating to comply with the law because direct disclosure of their clients’ financial assets violates their local laws. However, despite some of the pushback to the law, so far the U.S. has reached agreements with more than 80 jurisdictions allowing for government-to-government or business-to-government exchanges. This list of jurisdiction includes countries that are often associated as tax havens, such as the British Virgin Islands and the Cayman Islands.
Tags: bloomberg, british virgin islands, cayman islands, fatca, irs, richard rubin, united states
