WASHINGTON May 1 Israel has become the latest
country to reach a tax information-sharing agreement with the
United States under a new law meant to combat offshore tax
dodging by Americans, a U.S. Treasury Department spokesperson
said on Thursday.
Set to take effect on July 1, the Foreign Account Tax
Compliance Act of 2010 (FATCA) will require foreign banks,
investment funds and insurers to hand over information about
Americans' accounts that have more than $50,000 to the U.S.
Internal Revenue Service.
After four years of preparation and two delays, U.S.
Treasury officials are racing to negotiate as many FATCA pacts
as possible with foreign governments to avoid a messy start to
the law, which has steep enforcement penalties.
The Treasury has reached 57 FATCA deals to date with areas
ranging from India to the Isle of Man.
Foreign firms that do not comply with FATCA face a 30
percent withholding tax on their U.S. investment income and
could effectively be frozen out of U.S. capital markets.
Like most of the other FATCA deals, the Israeli agreement
will allow Israeli firms to report U.S. account-holder
information to their local tax authority, which will send it
along to the IRS. The Israeli deal was agreed "in substance" and
must be finalized by the end of the year.
Financial firms in countries that have not reached a FATCA
pact, known as an intergovernmental agreement, must report
directly to the IRS and risk violating local privacy laws.
FATCA was enacted after a scandal involving Americans hiding
money in Swiss bank accounts. The law's start date was delayed
twice by the Obama administration as banks complained they
needed more time to prepare.
Separately, U.S. authorities on Wednesday charged a former
senior vice president of an unnamed bank headquartered in Tel
Aviv, Israel, with conspiracy for allegedly helping Americans
dodge taxes, the U.S. Justice Department said.
Shokrollah Baravarian of California allegedly set up secret
accounts for U.S. clients to keep money hidden from the IRS, the
Justice Department said.
(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh.
Editing by Andre Grenon)