A new global standard for governments to crack down on tax evasion has been released by the Organisation of Economic Cooperation and Development (OECD).
Almost 70 countries have already signed up to the charter, which will roll out a US style Foreign Account Tax Compliance Act (FATCA) law globally.
FATCA started on July 1, 2014 and requires offshore financial providers to report the financial affairs of US taxpayers to the Internal Revenue Service (IRS) each year.
The OECD version aims to draw back the veil on banking secrecy for individuals, companies and trusts who try to hide money outside their home countries to avoid paying the right amount of tax.
The Standard for Automatic Exchange of Financial Account Information in Tax Matters is a blueprint tax treaty for governments.
Nowhere left to hide
The standard calls for financial institutions to automatically give their local tax authorities account information on all customers for onward transmission to their home states.
The agreement is designed to help tax authorities compare tax returns or identify undeclared income held offshore.
Financial information, says the OECD, includes:
- Bank and investment account balances
- Details of interest paid on savings and investments
- Dividends paid by offshore companies
- Information about any proceeds raised from selling assets
All customers, including individuals, companies, trusts and foundations are caught in the tax information net.
“Governments asked us to draft the standard to fight tax fraud and evasion,” said OECD Secretary-General Angel Gurria. “We hope this work will leave tax cheats nowhere left to keep their money and assets in secret.
“The message we want to send is that the network is ready for implementation and anyone who has not declared their full financial status should consider sorting out their affairs straight away.”
Undeclared wealth
The standard will be rubber-stamped by G20 finance ministers when they meet in Cairns, Australia, in September.
The network and information exchange is expected to go live sometime in 2017, to give member nations the time to implement monitoring.
“We already have 65 nations signed up to take part in the network and expect many more to join over the next few months,” said Gurria.
More than 120 countries and financial jurisdictions are playing an active part in FATCA, and all are likely to join the OECD network.
The OECD says that more than 500,000 taxpayers have volunteered previously undeclared financial income and assets to their tax authorities since FATCA and the OECD standard were announced.
These disclosures have resulted in governments raising more than £21 billion worldwide in extra tax revenue.
This article fails to mention American ex-pats with high level education, good jobs, and wealth are just heading for the renunciation door.
The US won’t have any real wealth to tax abroad as time passes.
Also in the US FATCA will be challenged in the US Supreme Court, in Canada the Canadian Supreme Court, and I’m sure someone will eventually mount a challenge in the European Court of Justice.
FATCA is not a done deal by any stretch.
Go to isaacbrocksociety dot ca for more details.
A big difference between the OECD plan and FATCA is that all nonUS countries in the OECD have residency based taxation – the earnings and income are only taxed in your country of residence and not by overseas countries. The US has citizenship based taxation meaning you could be resident in one country and paying all the tax there as required, but wait there is more tax to pay to the U.S. The tax treaties provide limited protection from double taxation which the U.S. likes to define very narrowly and consider each little tax in itself. It gets worse as you get near retirement. The U.S. has taxes that your home country may not then they get put on top without tax credit relief. The best tax breaks for either country get cancelled out (thanks for that America). The laws also change. You don’t live in the U.S. but you they may be up for the 3.8% Obamacare investment tax.
Generally, American Expats are outraged by FATCA. The Wall Street Journal reports that FATCA worsens the already profoundly unjust tax treatment of millions of middle-class Americans living abroad. FATCA rules were intended to correct a tax loophole. Applied to Americans living abroad they are absurd. “Absurd” why would the American Wall Street Journal use that word? Maybe it has something to do with all the forms and compliance and outrageous penalties if not done right all seemingly designed for the US person living in the US, not for those living overseas for whom all their accounts are “foreign.”
According to The Economist: America’s new law on tax compliance is heavy-handed, inequitable and hypocritical. Sounds like strong language!
https://www.economist.com/news/leaders/21605907-americas-new-law-tax-compliance-heavy-handed-inequitable-and-hypocritical-fatcas-flaws/
I live overseas longtime and I don’t think it right that the USA deny me any tax deferred retirement account for my earnings in any country. The U.S. wants to tax my annual account gains at my U.S. marginal tax rate, pretending that their laws apply globally and if my retirement account is not a “qualified” pension fund under U.S. law, then it is an unqualified pension fund and needs punitive tax.
The U.S. inalienable rights of liberty and the pursuit of happiness only really apply to those US citizens who live in the U.S., even though the U.S. Constitution makes no distinction between those Americans living in America and those who live overseas. That is where I see hypocrisy.
Double taxation without representation. Freedom from the tyranny of an overseas sovereign. Sounds like the reasons the American colonists broke away from England.
See the Issac Brock Society: https://isaacbrocksociety.ca/
and The Alliance for the Defense of Canadian Sovereignty: https://www.adcs-adsc.ca/