WASHINGTON Feb 27 U.S. tax authorities and foreign governments are on track to conclude dozens of agreements in coming months on the sharing of financial data about citizens, with deadlines nearing for implementation of a sweeping U.S. anti-tax-evasion law, tax experts said.
The U.S. Treasury on Monday initialed an intergovernmental agreement (IGA) with Germany, for instance. The deal still needs final approval by both countries' tax officials, but shows progress being made in implementing the Foreign Account Tax Compliance Act (FATCA).
FATCA, made law in 2010 as part of a crackdown on tax dodging by wealthy Americans, requires foreign financial institutions to disclose to the Internal Revenue Service more about Americans' offshore accounts that are worth more than $50,000.
Banks and other institutions are affected by the law, which Treasury is implementing through a series of bilateral IGAs. Completed pacts are in place with Britain, Denmark, Ireland, Mexico and, since earlier this month, with Switzerland.
More than 50 other countries are working with Treasury to sign IGAs by the end of the year. FATCA takes full effect on Jan. 1, 2014. An interim deadline is Oct. 25, when foreign firms need to register with the IRS for FATCA.
Germany was "the next big domino to fall" in Treasury's IGA process, said Jonathan Jackel, a lawyer with Burt, Staples & Maner LLP. The German deal was "a positive development" for additional IGAs, he said.
If a foreign firm fails to comply with FATCA, it could be frozen out of U.S. capital markets.
Treasury and IRS still need to publish forms and instructions for foreign banks and other financial institutions so they can comply with FATCA. The foreign firms will begin reporting U.S. client information to the IRS beginning in 2015.
FATCA implementation is seen by some tax experts as contributing to greater tax strictness around the world.
The European Commission said on Monday that it is studying EU-wide taxpayer identification numbers to fight tax evasion.
"There's been a real shift on the international level in identifying tax evasion as a massive social problem," said Heather Lowe, director of government affairs at anti-graft watchdog Global Financial Integrity.
"The U.S. definitely kicked it off, but Europe's now running with it," Lowe said. "There is a sense of urgency."
Separately, Manal Corwin, deputy assistant Treasury secretary for international tax affairs and a top negotiator for FATCA, has left the department, a Treasury spokeswoman confirmed on Wednesday.