MercoPress. South Atlantic News Agency

US Treasury and IRS announce further steps to curtail offshore tax evasion

FATCA is “rapidly becoming the global standard in the effort to curb offshore tax evasion”

The United States Department of Treasury says it is taking steps to curtail offshore tax evasion in the Caribbean and other places. The US Treasury Department along with the US Internal Revenue Service (IRS) have issued a notice for foreign financial institutions (FFIs) to comply with information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA).

 The department said the FATCA is “rapidly becoming the global standard in the effort to curb offshore tax evasion.”

According to the Treasury Department, to date it has reached 16 agreements “in substance and is engaged in related conversations with many more jurisdictions.

“The notice, which is the next step in implementation, previews proposed guidance and provides a draft agreement for participating FFIs directly engaging in agreements with the IRS and those reporting through a Model 2 intergovernmental agreement (IGA),” the statement said.

“It provides FFIs with advance notice prior to the beginning of FATCA withholding and account due diligence requirements on July 1, 2014,” it added, stating that the FFI agreement will be finalized by year’s end.

Robert B. Stack, the US Deputy Assistant Secretary for International Tax Affairs, said the Agreement and forthcoming guidance have been designed to “minimize administrative burdens and related costs for foreign financial institutions and withholding agents.”

He said the latest preview “demonstrates the Administration’s commitment to ensuring full global cooperation and a smooth implementation.”

In 2010, the US Congress enacted FATCA as “a way to identify US citizens using foreign accounts to evade their US tax responsibilities.”

FATCA requires US financial institutions to withhold a portion of payments made to FFIs that do not agree to identify and report information on US account holders. The US Treasury Department said it has taken a global approach to the exchange of tax information in its implementation of FATCA.