U.S. Treasury finalizes anti-tax evasion pact with Ireland

WASHINGTON Thu Dec 6, 2012 6:25pm EST

WASHINGTON Dec 6 (Reuters) - The United States and Ireland have agreed to share information about wealthy citizens' financial accounts in a pact intended to combat tax evasion, another in a series of bilateral deals announced in recent weeks by the U.S. Treasury Department.

The deals are part of the implementation of the U.S. Foreign Account Tax Compliance Act, or FATCA, which takes effect in 2014.

An agreement with Switzerland has been "initialed," with final terms expected in coming days, Treasury said on Tuesday.

The United States has completed FATCA deals with the UK, Denmark and Mexico. Spain has also "initialed" with Treasury, the department said on Thursday.

Enacted in 2010, FATCA requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans' offshore accounts worth more than $50,000.

Banks, funds and other institutions failing to comply could effectively be forced out of U.S. financial markets.

Separately on Thursday, IRS Acting Commissioner Steven Miller highlighted FATCA as a "tool" that has compelled delinquent taxpayers with hidden assets abroad to enter a voluntary disclosure program at IRS.

FATCA has come under fire from Americans with foreign financial accounts because they are accustomed to secrecy. Foreign financial institutions have complained, too, about compliance costs and the law's intrusion, especially in countries where banking secrecy has been a part of the financial tradition.

Despite the controversy, the IRS' disclosure program has collected $5.5 billion. It continues to receive 75 to 150 applications a week from people seeking to enter the program, Miller said at a tax conference speech in Washington.

The program will remain open, but will be less sympathetic to new applicants going forward, he said.

The government-to-government FATCA deals are a pragmatic approach to enforcing the U.S. tax dragnet, experts have said.

"FATCA is doing its job," said Nicole Tichon, executive director of the nonprofit, nonpartisan Tax Justice Network, in an email. "FATCA is stemming the race to the bottom in terms of financial secrecy."

Miller also said he would consider merging a taxpayer's FATCA compliance with an older, similar statute known as the Report of Foreign Bank and Financial Accounts (FBAR).

The FBAR form, which is due annually, is required of any U.S. person who has a financial interest or signature authority over foreign financial accounts whose value topped $10,000 at any time during the calendar year.

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Comments (5)
quant18 wrote:
“FATCA has come under fire from Americans with foreign financial accounts because they are accustomed to secrecy”??? What a facile and propagandistic generalisation. In reality, “Americans with foreign financial accounts” comprises a broad class of people, including immigrants who have retirement plans in the old country that they can’t withdraw, and emigrants who are “accustomed” to paying their rent and buying groceries with a local bank account just like you folks in the Homeland get to do. These cases are about practicality, not secrecy.

But of course you’re not going to be able to write a neutral and well-informed report when your only sources are the IRS and the Tax Justice Network. Where are the quotes from the rest of the extremely broad spectrum of opinion on FATCA? Art Cockfeld? Jim Jatras? American Citizens Abroad?

Dec 06, 2012 9:33pm EST  --  Report as abuse
So, Patrick, I know you are under limited resources these days at Reuters, but did you just receive two press releases and regurgitate what propaganda was put forth by Treasury without a single clarifying question? It certainly appears so.

In the first section, regarding Ireland, it might have been helpful if you explained to your readers, that this was an agreement between Treasury technocrats. It will require modification of Ireland’s privacy and human rights laws to accept the FATCA CRAM Down that America unilaterally demands without regard to their sovereignty.

It will then have to be approved by the Irish Parliament. So, hardly a done deal yet, as the article seems to imply. Of course, that is the impression Treasury wants to create. You bought the myth and passed it on. But, it isn’t that simple or iron clad a process.

On the US side, no matter how Treasury tries to characterize it, they are dictating a Tax Treaty under the guise of negotiation. The only negotiation is one of capitulation by Ireland, with allowances for some very minor exemptions in Annexes to the basic FATCA demands of Treasury. To call it ‘bi-lateral’ is a total abuse of the definition of the word!

A Treaty would normally require an “Advise and Consent” process from the Senate. However, Treasury has just unilaterally declared it an ‘Executive Agreement’, so it can by-pass Congressional due process. Will they pull it off? Maybe, if Reuter’s journalist never ask a question.

But, then again, maybe not, as this requires imposition of a domestic FATCA (DATCA)to be imposed on U.S. banks to provide some faux face saving reciprocity to Ireland. Congress did not sign up for this when they passed FATCA.

This action by Treasury, acting alone without Congressional approval, is repatriating the huge cost of FATCA compliance back onto homeland shores. It pretty much wipes out any supposed tax revenue gains this fiasco was supposed to create.

As we have recently seen, the Senate doesn’t like its sovereignty violated with UN Treaties on the disabled, and they might not like the Treasury just doing what it wants by handing over information from U.S. banks to other governments with these FATCA agreements.

In the second section of your article, on Steven Miller’s comments, you seem to just accepts at gospel his claims about the Voluntary Disclosure revenues, without a couple basic questions like:

1. How many were the Wealthy Whales you imply all of these anti tax evasion programs are about? How many were benign collateral damage expat or new immigrant Minnows who got caught up in a net not designed for them? What was the ratio of Minnows to Whales? That answer, if provided truthfully, might surprise you.

2. Of the total revenues collected, what was actually taxes due, and what portion was penalties? They used the 1970 Bank secrecy Act FBAR form, that few knew about until they pulled it off the shelf in 2009, as their penalty generating hammer of choice. What portion of $5.5 Billion was FBAR penalties? If it was a significant amount, it certainly will not be reoccurring tax revenue, now will it?

Finally, you report that Mr Miller said, “he would consider merging a taxpayer’s FATCA compliance with an older, similar statute known as the Report of Foreign Bank and Financial Accounts (FBAR)”

I would have thought a tax journalist would have immediately known that he does not have the statutory authority to do that, however a good idea it might be.

I won’t bore you with the details, but FBAR form is under administration by FINCEN. That is a different Title Statutory authority than FATCA Form which does rest with the IRS. He can modify the FATCA form, but there is nothing he can do about the FBAR on his own, no matter how good the intention.

It will be up to Congress to modify the 1970 Bank Secrecy Act, from hence the form comes. Then again, Treasury has been showing a lot of hubris recently, acting unilaterally without regard to the will of Congress, so maybe he thinks he can. However, I would caution him, that his title still includes the word “Acting” in front of “Commissioner”. :)

Dec 07, 2012 5:14am EST  --  Report as abuse
CitizenAbroad wrote:
An aspect of FATCA that is normally not discussed is its security risk to Americans abroad. FATCA agreements require that foreign governments or banks build data bases of American citizens with non-US bank accounts. Consider that you are a US citizen living and working in Pakistan, Afghanistan, Lebanon, Somalia, etc. and now, because of FATCA, you are identified in the local bank’s electronic records as an American. A terrorist or mob group infiltrates the bank or government agency and, presto, they have a well-prepared list of Americans living in the country with personal and financial details. The Taliban, Hezbollah, al-Qaeda, al-Shabab, etc. buys the list and then begins to assassinate or extort Americans abroad using information conveniently gathered for FATCA purposes.

Michael Young, the opinion editor for Lebanon’s Daily Star, describes such a scenario in the Now Lebanon on-line newspaper today. Search on “Fatca’s security problem” to read this excellent editorial.

Dec 07, 2012 12:29pm EST  --  Report as abuse
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