Robert B. Stack
As the perils of offshore tax evasion have received increased public scrutiny, the Treasury Department has continued to ramp up efforts to promote global tax transparency. Over several months, Treasury has been working with governments and financial institutions to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, FATCA targets U.S. taxpayers who use foreign accounts to avoid paying U.S. taxes. Here are some ways that Treasury is working to ensure effective implementation of FATCA.
Global Cooperation and Intergovernmental Agreements
In order to effectively combat offshore tax evasion, global cooperation is critical. To that end, Treasury has published two model intergovernmental agreements (IGAs) that serve as a basis for concluding bilateral agreements with jurisdictions to implement FATCA. Treasury has been working to streamline the process of entering into an IGA so that any interested jurisdiction may enter into an IGA prior to January 1, 2014.
The Treasury Department is currently engaged with more than 75 jurisdictions and has already concluded bilateral agreements with the United Kingdom, Denmark, Mexico, Ireland, and Switzerland and initialed bilateral agreements with Spain, Italy, Norway, and Germany. Moving forward, Treasury will continue to engage willing partners worldwide to ensure implementation of FATCA.
Earlier this year, Treasury and the Internal Revenue Service (IRS) issued comprehensive final FATCA regulations. These regulations provide certainty for governments and financial institutions by finalizing the step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions, other foreign entities, and U.S. withholding agents. Additionally, to limit market disruption, reduce administrative burdens, and provide certainty, the final regulations provide relief from withholding with respect to certain grandfathered obligations and from reporting for certain non-financial or low-risk entities.
What Others Are Saying
Below are some of the statements issued about Treasury’s engagement on FATCA around the world.
Taiwan: The Taiwan authorities are supportive of the underlying goals of FATCA, and are interested in exploring a framework for mutual cooperation to facilitate the implementation of FATCA. – The Financial Supervisory Commission (FSC) and the Ministry of Finance (MOF), 4/2/13.
United Arab Emirates: The competent authorities in UAE are considering signing an agreement with the Government of the United States of America for FATCA Compliance. – Governor of the Central Bank H.E. Sultan Bin Nasser Al Suwaidi, 3/27/13.
Cayman Islands: Th[e] decision to adopt the Model 1 IGA will fortify our good standing in the global community and continue to build on the solid foundation we already have in place with our existing agreements. We will continue to take our place in the international arena and ensure that we maintain our positive and informed engagement in the rapidly developing environment of international tax cooperation. – Minister for Financial Services, 3/5/13.
South Africa: National Treasury and the South African Revenue Service (SARS) are opening negotiations with the United States Department of the Treasury with a view to concluding an inter-governmental agreement with respect to the USA’s Foreign Account Tax Compliance Act (FATCA). An agreement of this nature would significantly reduce South African financial institutions’ compliance costs with respect to FATCA. – National Treasury, 2/8/13.
Singapore: The Singapore Government is in talks with the US Department of the Treasury to conclude an IGA on the FATCA. This is in line with Singapore’s role as a responsible tax jurisdiction and our commitment to safeguard our financial system from being used to harbour illegal proceeds. – Singapore Treasury, 11/9/12.
Australia: An intergovernmental agreement would also improve existing reciprocal tax information sharing arrangements between the Australian Taxation Office and the United States Internal Revenue Service. This will help ensure Australian tax laws are effectively enforced so that Australian businesses and individuals who pay their fair share of tax are not disadvantaged by those who seek to evade their tax obligations – Treasurer Wayne Swan, 11/7/12.
New Zealand: Without an inter-governmental agreement, financial institutions would have to enter into separate agreements with the IRS, withhold tax on certain accounts, and risk being in conflict with New Zealand's privacy and human rights laws. – Revenue Minister Peter Dunne, 10/3/12.
Updates and further information on FATCA can be found by visiting the Treasury FATCA page.
Robert B. Stack is the Deputy Assistant Secretary for International Tax Affairs at the U.S. Department of the Treasury.