Robert Wood perspective on #FATCA and countries siging IGAs

Interesting Robert Wood post from Robert Wood about FATCA. Comments include interesting discussion about citizenship-based taxation.

Now, the U.S. scores another pair of big wins by signing Intergovernmental Agreements (IGAs) with the Cayman Islands and Costa Rica. FATCA was quietly enacted in 2010 in a big messy bill called the Hiring Incentives to Restore Employment Act of 2010 (P.L. 111-147). Today, FATCA is the centerpiece of U.S. efforts to curb tax evasion everywhere.

Some FFIs report to the IRS voluntarily, some via agreements. An Intergovernmental Agreement can allow a bank or other FFI to report to its own government on Americans. The foreign government can then report to the IRS.

Foreign banks can use this avenue so they do not need to report directly to the IRS. But like it or not, report they must, and there is little sign they will refuse. The IRS can be expected to take advantage of the expanded web of global reporting.

FATCA collects information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) that do not agree to identify and report information on U.S. account holders. Almost no FFI wants to be in that position.

The Cayman Islands IGA here is a Model 1B agreement. That means FFIs in the Cayman Islands must report tax information about U.S. account holders to the Cayman Islands Tax Information Authority. That agency acts as the sole channel in the Cayman Islands for the provision of tax-related information to other governments.

In turn, the Cayman Islands Tax Information Authority then relays the information to the IRS. But the win for the U.S. didn’t end there. The two countries also signed a new Tax Information Exchange Agreement (TIEA), to take the place of the original one signed in 2001.

The Costa Rica IGA here is a Model 1A agreement. That means the United States will also provide tax information to the Costa Rican government regarding Costa Rican individuals with accounts in the United States. It’s a kind of reciprocity.

 

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One thought on “Robert Wood perspective on #FATCA and countries siging IGAs

  1. Em

    FromPatriotToExPatriot is dealing with Robert Wood quite nicely and since I find Mr. Wood’s “FATCA is going gangbusters” mindset quite scary I’ll just post a comment I left at the Globe & Mail here:

    The Cayman Islands might be a popular destination for wealth but they are not the world’s biggest tax haven. The winner and still champion in that category is the U.S.A. No wonder the U.S. banks are “rankled” by the reciprocity aspect of Model 1 IGAs. Actually the U.S. banks needn’t worry too much because the U.S. government is not really going to give other countries true reciprocity. It is offering only a promise to attempt to make it happen. You can’t take that promise seriously, I guarantee it.

    The FATCA fearful nations are dropping like flies … or are they? Only 12 signees after a 2 year head bashing campaign by the U.S. Treasury to get FATCA enacted by covet means — i.e. with IGAs. They had expected 50 IGAs by the end of 2012. So they only need another 180 countries to sign on the dotted line before July 1, 2014 or, if they disregard about 100 countries which they deem not worth the bother, they only need about 80 more. Rep. Bill Posey is already mustering congressional forces to put the kibosh on reciprocity, IGAs and perhaps even FATCA itself. Take a look at part of what he wrote in a letter to Secretary of the Treasury, Jack Lew:

    “Finally, it is difficult to avoid the conclusion that the flaws evident in the IGAs being negotiated to implement FATCA reflect flaws in the Act itself. It is clear that FATCA must be either substantially amended or repealed, and replaced with a cooperative scheme that penalizes actual tax evasion without harming the innocent. Legislation to repeal FATCA was recently introduced in the Senate, and I expect a companion bill will soon be introduced in the House of Representatives­.”

    Reply

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