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Offshore account tax enforcement: FATCA still not a done deal

Experienced policy makers should be aware that sweeping new laws do not necessarily achieve their stated purposes.

We’re not talking here about the ambitious goals of the federal Affordable Care Act (ACA) - though the ACA does have considerable implications for tax compliance.

We are talking, rather, about another sweeping new law, the Foreign Account Tax Compliance Act (FATCA). As we will discuss in this post, there are some who feel that this far-reaching new effort to promote offshore account disclosure will fall short of that goal.

There are many reasons for this. For starters, FATCA has prompted vocal pushback from foreign financial institutions and U.S. taxpayers alike.

The resistance among taxpayers has been so strenuous that many U.S. citizens who live abroad have chosen to give up their citizenship rather than comply with the law. These passport renunciations have been widely reported in the offshore tax community.

Foreign financial institutions have also pushed back against FATCA. The Swiss, in particular, have pointed to their historic traditions of bank account privacy.

The U.S. has tried to forge ahead, crafting intergovernmental agreements (IGAs) with foreign governments to put pressure on foreign banks.

But the result of all the back and forth has been numerous delays in FATCA’s original implementation timeline.

In short, four years after its passage by Congress in 2010, the U.S. attempt to impose FATCA on the rest of the world is far from a done deal.

Meanwhile, two other international organizations are exploring the creation of their own standards for preventing offshore tax evasion. These organizations are the group of G20 industrialized countries and the Organization for Economic Cooperation and Development (OECD).

Source: Forbes, "The Foreign Account Tax Compliance Act Will Fail to Curb Tax Evasion," Andrew Quinlan, March 16, 2014

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