Police and fire prevention officers have shut down the newly-opened $20 million Caribbean Cinemas South Park ten multiplex cinema, just a day after its gala opening in San...
You are here
US releases last rules in crackdown on offshore tax evasion
WASHINGTON DC—United States authorities have released the “last substantial” package of regulations to combat offshore tax evasion in the Caribbean, saying the measures were also necessary to implement the Foreign Account Tax Compliance Act (Fatca).
The Department of the Treasury (DOT) and Internal Revenue Service (IRS) said the regulations make additions and clarifications to previously issued Fatca measures and provide guidance to co-ordinate Fatca rules with preexisting due diligence, reporting, and withholding requirements under other provisions of the Internal Revenue Code (Code).
“Offshore tax evasion undermines confidence in our tax system and deprives the United States of revenues necessary to protect and provide for its citizens,” said DOT Secretary Jacob J Lew. “There is significant momentum to implement Fatca across the globe, and we will continue to work closely with our international partners to combat these illicit activities and raise global tax standards,” he added.
The DOT said, each year, “some wealthy individuals evade millions of dollars in taxes through the use of offshore financial accounts that are not reported to the IRS or other tax authorities. “This international tax evasion is illegal, contributes to the federal debt, and creates inequity within the tax system,” it added. The US Congress enacted Fatca in 2010 with bipartisan support to target these illicit activities, stating that the provision has since become the global standard for promoting tax transparency.
The Fatca seeks to obtain information on accounts held by US taxpayers in other countries, including the Caribbean. The DOT said the Fatca generally requires US financial institutions to withhold a portion of certain payments made to certain foreign financial institutions (FFIs) that do not agree to identify and report information on US account holders.
It said this withholding regime acts as a backstop to the main focus of Fatca, which is to obtain the information about accounts held by US citizens and by certain foreign entities with substantial US owners that is needed to detect and deter offshore tax evasion. To address situations where foreign law would prevent an FFI from reporting directly to the IRS the information, the DOT said it has developed two alternative model intergovernmental agreements (IGAs).
It said these IGAs facilitate the “effective and efficient implementation of Fatca information reporting in a manner that removes foreign law impediments to compliance, fulfills the information reporting objectives of chapter 4, and further reduces burdens on FFIs located in partner jurisdictions.” The DOT said the United States has signed agreements with 22 countries, adding that many more have either reached agreements in substance that are awaiting signature, or are “well along in the process.”
The DOT said final regulations for Fatca were published in January 2013, about a year and a half before Fatca withholding will go into effect on July 1, 2014.
Since final regulations were issued, the DOT said it and the IRS have facilitated a “smooth implementation” by extending the start of withholding and account due diligence requirements by six-months to July 1, 2014; opening the Fatca portal in August 2013; issuing a final FFI Agreement for financial institutions in January 2014; and engaging in active discussions with stakeholders worldwide.
“Today’s package builds upon this effort and includes amendments and clarifications in response to comments received on the final regulations released in January,” the DOT said.