The Treasury Department has signed a bilateral agreement with Switzerland to share tax information in an effort to improve tax compliance and combat international tax evasion.
The agreement came as part of the effort to implement the Foreign Account Tax Compliance Act, or FATCA, which was included as part of the HIRE Act of 2010.
On Jan. 17, 2013, the Treasury Department and the IRS finalized the regulations implementing FATCA, providing additional certainty for financial institutions and government counterparts about the process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions, other foreign entities, and U.S. withholding agents (see Treasury Releases Final FATCA Regulations to Fight Offshore Tax Evasion).
The Treasury has signed bilateral agreements with a number of countries so far to share information with their tax authorities, including the United Kingdom, Denmark, Mexico and Ireland.
But the agreement with Switzerland is particularly significant as the Internal Revenue Service and the Justice Department have been pursuing information from Swiss banks like UBS, Credit Suisse, Wegelin and Julius Baer to uncover information about U.S. taxpayers with secret bank accounts, while negotiating with the Swiss government over its longstanding banking secrecy laws.
The agreement would implement FATCA with respect to all Swiss financial institutions, ensure that all the required information about identified U.S. accounts will be reported to the IRS and remove legal impediments to compliance. It would also increase legal certainty by clarifying which Swiss financial institutions are subject to FATCA implementation, reduce implementation costs including by suspending under certain circumstances certain withholding and account closing obligations, and simplify the necessary due diligence procedures.
Switzerland is one of eight countries that have signed or initialed an intergovernmental agreement, which helps to facilitate the effective and efficient implementation of FATCA. In addition to the previously announced countries, the Treasury noted that it initialed an IGA with Italy on January 24. The Treasury is currently in talks with more than 50 countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.
“Today’s announcement marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion,” said Acting Secretary of the Treasury Neal S. Wolin in a statement. “We are pleased that Switzerland has signed a bilateral agreement with us, and we look forward to quickly concluding agreements based on this model with other jurisdictions.”
Enacted by Congress in 2010, FATCA targets noncompliance by U.S. taxpayers using foreign accounts. The bilateral agreement signed Thursday is the first based on the model published in November of 2012—the second of two model agreements—and marks another important step in establishing a common approach to combatting tax evasion.
Updates and further information on FATCA can be found by visiting the Treasury FATCA page.
4 Comments
It was a "bilateral" agreement, in the same sense as the Japanese Unconditional Surrender to General Douglas MacArthur on the deck of the Battleship Missouri on September 2, 1945.
The US has exceptional bullying power which far exceeds that of any other nation, with the possible exception of China. China so far has demonstrated no intention whatsoever of kow-towing to extraterritorial legislation of the US or any other nation that would obligate is banks to violate its own privacy laws. As the prime holder of US sovereign debt, this rejection is not insignificant.
Posted by: RogerC | February 15, 2013 12:34 PM
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Every country will roll over and sign the agreement and simply close any account that would qualify as an account they would have to report on. Only the super rich and multinational corporations that have large business interests in the countries who sign, will be kept as customers. Account closings, currency laws that make it illegal to buy dollars needed to pay U.S. Taxes, double taxation, and forms the average person will have to have help filling out, will kill what is left of our sales, service, and engineering core that once designed, serviced and sold goods, from the largest most efficient production machine ever conceived. U.S.A. RIP There is one salvation that every Washington Puke, tax lawyer,Tax preparer and every one connected with the Tax Industry that wastes 100 billion dollars a year, hates and that is the FairTax. The Ways and Means Committee and all the sub-committees, numbering 46 in all, extorts "Campaign Contributions" from all above so they can do the only job they do well. Getting re-elected is their one and only job. Even those who drank the Kool-Aide for Obama hates the congress and the proof is their 9% approval that is consistent year to year.
Posted by: wjeretidwell | February 15, 2013 12:02 PM
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I have nothing against the USA and countries in the world trying to combat tax evasion. I am all for it. But I am against and very distressed by this one size fits all that affects the lives of honest, hard working American citizens who live and work in another country. By the way this is also the views of the IRS Tax Adviser in her 2012 and 2013 Report to the Congress. For some reason she has not been heard. In the mean time my life as an American Abroad became a nightmare when I file my taxes and try to comply with all demands for forms and forms. Because I don't have representation I am and easy prey to these unfair and impossible demands.
Posted by: Stressedman | February 15, 2013 9:18 AM
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The agreement has indeed been signed, but it still has to be approved by the Swiss Parliament to become effective. Meanwhile Swiss banks continue to close down the accounts of US citizens resident in Switzerland because of the massive costs the banks must incur in identifying Swiss citizens who may be dual US citizens and thus subject to the requirement of reporting their accounts, including full account activity, to the IRS. The information which foreign banks must furnish to the IRS on their US-person accounts is the kind of information which the IRS can only obtain from US banks on their accounts with a court order based on credible evidence of tax fraud. So the assumption of this legislation really is that any US citizen who has as foreign bank account, even living abroad where he must have a local account to survive, is a tax-evading traitor unless this foreign bank data proves otherwise.
And somehow Congress just can't figure out why the US has a $744 billion merchandise trade deficit, which has destroyed some 7.9 million US jobs producing for export and costing the US Treasury some $136 billion in not generated tax revenues, whereas most of our industrialized trade competitor nations, all of which encourage their citizens to go abroad and create jobs at home by selling exports, have trade surpluses. Germany closed 2012 with a record $243 billion trade surplus and the lowest unemployment rate in 21 years. It takes American feet on the ground in foreign markets to sell our exports. Thanks to the residence based taxation of other nations, they have them, but thanks to our citizenship-based taxation and laws like FATCA, Americans stay home. Our cumulative trade deficit since 1976, the year Congress legislated this double taxation of our citizens abroad with a vengeance so they would stay home, now exceeds $9 trillion. You reap what you sow.
Switzerland was not interested in reciprocal information on the US bank accounts of Swiss citizens living in the US, because it does not subject the income of its citizens domiciled abroad to Swiss taxes. The US is the only industrialized nation that imposes extraterritorial taxation of its citizens who are bona-fide residents of another country.
Posted by: RogerC | February 15, 2013 8:43 AM
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