Many of our tax-noncompliant clients are fearful of being involuntary discovered through the impending FATCA…
FATCA Repeal Fails
Last month US Senator Roger Wicker (R-Miss.) introduced a budget amendment SA 621 to repeal the Foreign Account Tax Compliance Act (FATCA) FATCA requires foreign financial institutions to disclose to the IRS about their U.S. customers’ accounts.
The U.S. loses an estimated $150 billion in tax revenue each year to tax haven abuse – a revenue shortfall that honest taxpayers have to make up. About $40-70 billion of that revenue loss is from individual tax evasion. In light of those numbers, the virtues of FATCA become exceedingly clear.
FATCA is an enforcement tool. It exists to give the U.S. government the information it needs to determine ownership of assets in foreign accounts and make it harder for taxpayers to hide assets and evade tax. While FATCA is heavily criticized by foreign governments and financial institutions when it was first enacted, now it is being hailed as the catalyst for change and an example for inter-governmental agreements around the world.
Countries and financial institutions that sign FATCA compliance agreements with the US government agree to automatically share certain tax information. To date, over 77,000 banks and 80 countries have signed such agreements. In 2013, G8 leaders pledged to crack down on tax avoidance and improve transparency by working toward a global version of FATCA. The G20 that year agreed to automatically exchange information by the end of 2015 and called such exchange “the new standard.” In 2014, 47 countries agreed to a global standard of information exchange developed by the Organization for Economic Cooperation and Development.
Last week, budget amendment SA 621, to repeal the Foreign Account Tax Compliance Act (FATCA), failed to reach the US Senate floor for a vote on Friday.
“It’s an unpopular idea to overturn existing tax transparency laws in the Senate,” said Eric LeCompte, executive director of the financial reform organization Jubilee USA Network, which generated thousands of phone calls into the Senate in support of FATCA. “The lack of support for repealing FATCA shows how important anti-corruption legislation is to Congress.”
So for the time being, expect FATCA to remain as a fixed law and powerful enforcement tool.