The Vatican has signed an intergovernmental agreement with the U.S. Treasury Department to implement the Foreign Account Tax Compliance Act, or FATCA.
FATCA was included as part of the HIRE Act of 2010 and requires foreign financial institutions to report on the holdings of U.S. taxpayers, or else face stiff withholding penalties of up to 30 percent on the U.S. source income. The law has attracted controversy abroad, and the Treasury has been signing intergovernmental agreements with a number of tax authorities in other countries, in most cases agreeing to have them act as intermediaries.
Under Pope Francis, the Vatican has been moving to bring more transparency to its financial operations, particularly at the scandal-scarred Vatican Bank, which has been dogged for years by accusations of money laundering, corruption and financial mismanagement. Last week, the Vatican named the former chairman and CEO of Deloitte Italy, Libero Milone, as its first auditor general (see Former Deloitte Italy CEO Appointed to Audit Vatican).
On Wednesday, the Holy See’s Secretary for Relations with States, Archbishop Paul Gallagher, and the U.S. Ambassador to the Holy See, Kenneth F. Hackett, signed the agreement with the U.S. to implement FATCA.
In a joint statement, the Vatican and the U.S. said this is the first formal inter-governmental agreement between the Holy See and the United States and it “underscores the commitment of both parties to promote and ensure ethical behavior in the financial and economic fields. In particular, this agreement will prevent tax evasion and facilitate the compliance of fiscal duties by those U.S. Citizens who conduct financial activities in Vatican City State.”
They added that by combating tax evasion, they would be able to provide adequate tax revenues for public spending. “Ensuring the payment of taxes and preventing tax evasion are of crucial economic importance for every community since adequate tax revenues and public spending are indispensable for governments to become instruments of development and solidarity, to encourage employment growth, to sustain business and charitable activities, and to provide systems of social insurance and assistance designed to protect the weakest members of society,” said the joint statement. “In a context of economic globalization, it is therefore essential to strengthen the exchange of information with the view to prevent tax evasion. The present agreement is thus based on the most up-to-date global standards to curtail offshore tax evasion through the automatic exchange of tax information.”
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