FATCA update – Ongoing Negotiations (50 countries) that are closing the global net
As we noted in our blog IRS Moves FATCA Timelines, the IRS has pushed back the dates for implementation of various provisions of FATCA – but the Treasury Department is not sitting still.
On November 8th the Treasury announced: “… that it is engaged with more than 50 countries and jurisdictions around the world to improve international tax compliance and implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).”
The announcement goes on: “The Treasury Department has already concluded a bilateral agreement with the United Kingdom. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement (IGA) and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.” See recap of US UK bilateral IGA and which institutions specifically are affected.
Active dialogue is in place with: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden.
In addition, initial discussions have begun with: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Saint Maarten, Slovenia, and South Africa.
Why would so many countries be rushing to sign an IGA with the USA?
Every country the IRS is currently in negotiations with will welcome the financial information that will be handed to them by the IRS on their own citizens. For example, the UK, will now welcome the financial information they will receive from the IRS – regarding the name, address and US bank and brokerage account details of UK residents. HMRC are more than happy to match the information they have on file for UK tax residents against the list of UK residents with US bank/brokerage accounts they receive from the IRS. In exchange, the IRS will receive details from UK banks and brokerage houses on accounts owned by US citizens, US residents and green card holders.
Both governments are happy, they are both receiving information about potential taxable income which may not have been reported and therefore revenue not collected. The cost of gathering this information is born by the banks and financial institutions, not the US and UK governments. The banks and financial institutions are attempting to pass the cost of FATCA compliance onto their customers who are dealing in US dollars and US investments.
Amazingly I do not see where the IRS are speaking to Greek authorities. It seems to me, the Greek authorities would love to know the US account details of Greek residents with bank/brokerage accounts in the USA.
Just based upon the number of countries that are currently in discussions with the IRS, it appears most countries in the world are in favor of the type of transparency the US government is pedaling. Each country needs money and the idea of having all of the banks and financial institutions around the world bear the cost of gathering that data and report it at little or no cost to the government is an excellent idea.
Now that the election is over, Obama remains in power with a clear majority in the Senate, although still a Republican controlled House. His next four years will be geared toward making a serious stab at getting US finances under control. Congress will hopefully focus on and reach an agreement for the budget by year end. It is clear to me, there will be continued focus on transparency with other countries, forcing all foreign and US financial institutions to bear the burden of reporting on citizens and residents in their respective countries.
The United States has historically been an excellent place for foreign nationals to hide money and we believe more unreported income has been held in US banks, than in any other jurisdiction in the world. Each country the US government is speaking to with regards to the IGAs, will welcome the financial information they will receive from the US government through the IRS and the US in turn, is keen to find out more about where American citizens are hiding their unreported money.
Remember, there are over 6 million Americans living abroad and only 465,000 who actually file, which leaves 5.5 million Americans who are not filing returns, although not all of those would owe tax. But if 38,000 people came forward under the 2009-2011 Offshore Voluntary Disclosure Programs and $5.5 billion was raised from just 38,000 delinquent taxpayers, you can imagine what type of funds would be raised by the 5.5 million Americans who are not filing or reporting.
You can read the full announcement here.