Switzerland, U.S. sign pact on fighting tax evasion

WASHINGTON Thu Feb 14, 2013 1:07pm EST

WASHINGTON (Reuters) - Advancing a U.S. crackdown on tax evasion by Americans, the U.S. Treasury Department said on Thursday that Switzerland and the United States have signed a pact to make Swiss banks disclose more information about U.S. account holders.

The agreement is the latest in a series between the United States and other countries designed to carry out the Foreign Account Tax Compliance Act, or FATCA, enacted in 2010.

The law requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans' offshore accounts worth more than $50,000. FATCA was enacted after a Swiss banking scandal showed U.S. taxpayers hid millions of dollars overseas.

The pact announced on Thursday, known as an intergovernmental agreement (IGA), needs to be ratified by the Swiss parliament. It does not need approval by the U.S. Senate. The deal has been close to completion since December.

FATCA imposes steep penalties beginning in 2014 on financial institutions that do not comply with the law. Banks and other financial institutions failing to comply could be frozen out of U.S. financial markets.

"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," Acting Secretary of the Treasury Neal Wolin said in a statement.

The Swiss Bankers Association said it welcomed the FATCA deal but remains critical of the compliance and administrative burdens of the U.S. law.

'MODEL TWO' DEAL

In signing the pact, Switzerland joins Britain, Denmark, Ireland and Mexico as countries that have finished FATCA IGAs with the United States.

The Treasury has pursued two different IGA model. The Swiss deal is the first 'model two' agreement signed. It will require Swiss financial institutions to provide U.S. account holder information directly to the IRS.

The four other IGAs concluded so far are 'model one' agreements, which allow financial institutions to comply with FATCA by channeling U.S. account-holder information through their national tax authorities to the IRS.

The Swiss deal is not reciprocal, unlike some other pacts, meaning the IRS will not provide Switzerland with information about Swiss citizens' accounts in U.S. banks.

The pact excludes Swiss social security, pension funds and some insurers from FATCA.

Japan is also working on a "model two" FATCA agreement, and Italy is in the final stages of a FATCA deal, according to the Treasury.

The Treasury is working with more than 50 countries to complete deals, but negotiations have not progressed with key U.S. trading partners Canada and China.

South Africa's National Treasury said earlier this month it had started negotiating with the Treasury for a FATCA deal and was aiming for a reciprocal pact.

Final rules for FATCA compliance were published in January. Financial firms must register by October 25, 2013, to avoid next year's penalties.

(Additional reporting by Katharina Bart in Zurich; Editing by Kevin Drawbaugh and John Wallace)

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Comments (2)
CitizenAbroad wrote:
It is likely coincidental that on the day that the US and Switzerland sign the FATCA Inter-Governmental Agreement that the Swiss “Handelszeitung” business newspaper carries a lengthy story on how Switzerland’s government is cozying up to Russia for investment and protection. But then again, with friends like the US, who needs enemies.

Feb 14, 2013 12:24pm EST  --  Report as abuse
I don’t think this statement is correct. You say

“In signing the pact, Switzerland joins Britain, Denmark, Ireland and Mexico as countries that have finished FATCA IGAs with the United States.”

To be FINISHED, means there is Parliament approval process and Swiss law changes needed to implement, and that is not so yet..

From GenevaLunch.com Google: US-Switzerland sign controversial Fatca agreement (update)

They say…

“Bern says in a statement issued after the signing, noting that the agreement must be submitted to parliament for approval. It is also subject to an optional referendum.”

So, this isn’t over and finished, until the FATCA Lady sings…

On a side note, this may be treated as a Tax Treaty by the participating countries (not bilateral by any means as it is basically a one way cram down) requiring their legislative approval. On the US side, Treasury has engineered these to be a Competent Authority (CA) Agreement, and not a Tax Treaty. Very clever. You have to love those FATCAnatics!

This way they don’t have to get Senate ‘Advise and Consent” and really open themselves up to Congressional scrutiny with how they are going about subverting the will of Congress. Congress could still wake up so there may be other hurtles ahead.

Feb 14, 2013 9:32pm EST  --  Report as abuse
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