WASHINGTON Feb 27 U.S. Senate investigators
have sharply criticized the implementation of a new Obama
administration law meant to fight offshore tax evasion by
Americans, saying that "gaping loopholes" in the law could let
shell companies skirt it.
The Senate Permanent Subcommittee on Investigations included
its criticisms in a long report released on Tuesday about how
Swiss bank Credit Suisse Group AG allegedly helped
Americans dodge taxes over several years.
The report cited concerns about implementation of 2010's
Foreign Account Tax Compliance Act (FATCA), which was enacted
after a scandal involving another Swiss bank, UBS AG,
and its role in helping Americans avoid taxes.
"The U.S. Treasury and IRS should close gaping loopholes in
FATCA that have no statutory basis," said the report from the
subcommittee, chaired by Democratic Senator Carl Levin.
The subcommittee said FATCA will let foreign financial
institutions treat offshore shell entities as exempt from FATCA,
even when they are owned and controlled by U.S. taxpayers.
"FATCA's disclosure requirements have been limited and
weakened by its implementing regulations," the report said.
Scheduled to take effect on July 1, FATCA will require
foreign banks to share information with the Internal Revenue
Service about Americans' accounts worth more than $50,000.
In February 2013, Switzerland signed a FATCA agreement with
the United States that allows its banks to comply with the law.
A Treasury Department spokeswoman said on Thursday that
FATCA implementation efforts had sought to mitigate headaches
for foreign banks. "We need to maintain a balance between
enforcement efforts and equity, including the burdens that may
be placed on financial institutions," the spokeswoman said.
"We are always exploring ways we can further work with
Congress and the IRS to improve this process," she said.
FATCA rules for business entities and individuals may create
an incentive for tax evasion with shell companies, said John
Harrington, a former Treasury Department tax official, who is
now with the law firm Dentons.
"That is a legitimate criticism," he said.