The Global Organisation for Economic Cooperation and Development’s proposed standard information exchange does not change the FATCA deadline.
Jeffrey S. Freeman, J.D., LL.M
It is estimated that the U.S. economy suffers a $500 billion loss annually due to tax evasion on foreign source income and assets hidden outside the country. This estimate triggered the creation of the Foreign Account Tax Compliance Act (FATCA) back in 2010 and is set to take effect on July 1, 2014. The United States has been entered into Inter-Governmental Agreements (IGAs) with over 22 countries and has reached agreements and is in negotiations more than a dozen more to report the required financial data for offshore bank accounts.
FATCA has greatly increased global concern over the use of foreign bank accounts to evade government taxation. The European Union estimated that governments lose hundreds of billions of dollars annually due to tax evasion of money stashed in undeclared offshore bank accounts.
A group of the twenty biggest economic powers requested that the Organisation for Economic Cooperation and Development (OECD) devise an agreement for countries to automatically share information on offshore bank and brokerage accounts with foreign tax authorities. This would eliminate hiding places for tax evaders globally.
As more governments clamp down on tax evasion, countries are increasingly willing to share information but there is not a consistency for the data sharing. So the OECD created a standard to simplify the exchange of financial details. Under the OECD designed standard banks, brokers, and some insurers and investment funds would have to report residents’ account balances, interest, dividends, and other investment income to their government. Financial companies would be required to identify the beneficiaries of shell companies, trusts, and other similar legal arrangements that are currently used to often evade tax payment. The government would make the information available automatically to any other government that has agreed to the information-sharing agreement.
So far there has been interest from 42 countries to utilize the standard for reporting financial information to foreign governments. Britain, France, Germany, and Italy are already in agreement with the OECD standard.
FATCA will still continue to go into effect in July, but it has already had a profound global impact bringing other countries to the realization of the significant tax losses due to offshore bank accounts. If you have concerns about your offshore investments and prior tax payment there is still time to contact expert legal counsel to navigate your responsibilities.
About Freeman Tax Law
Freeman Tax Law is a boutique tax law firm with national exposure equipped to handle all domestic and international tax law matters. At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.
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