More countries have signed up to international agreements aimed at bringing in more tax from abroad for the US government.
Ireland has joined a growing list of nations which will implement the US Foreign Account Tax Compliance Act (FATCA).
The law compels foreign financial institutions (FFIs) to reveal the name and account details of any US taxpayers on their books.
Failure to do so will see the US authorities impose a 30% transaction tax on any business conducted between the FFI and the US.
Most countries have had issues with how FATCA handles data and privacy laws outside the US.
Many have resolved these issues by signing up to reciprocal tax information exchange agreement that is tailored to protect taxpayer rights.
In the case of UK-based financial institutions, they have to register with US tax authorities and any information will be passed by the government and not directly as part of a deal to uncover British taxpayers with accounts in the US.
Ireland has signed a similar deal allowing financial institutions to report to their government and not directly to the US.
Irish Finance Minister Michael Noonan says the agreement will see a huge increase in the information automatically exchanged between the two countries and was vital to ‘prevent people from hiding money so they don’t pay tax’.
He added: “By signing this agreement we have shown our commitment to helping tackle international tax evasion and it will help clarify how Irish and US-based institutions do business with each other.
“We are one of the first countries to sign up and we will receive information on Irish residents and their American accounts in return.
“This agreement will have a positive impact on the trade and investment between our countries.”
The news was followed by Luxembourg’s announcement that work has started on an agreement to exchange financial information with US tax authorities.
Both countries held initial discussions in November. Luxembourg will sign-up to the ‘second model FATCA agreement’ which the US government introduced to help countries meet their domestic legal obligations.
Like other agreements, the document covers banks, insurance companies, trusts, investment funds and corporations who will have to sign up with the tax authorities and meet their FATCA obligations.
Luxembourg says negotiations will finish by the summer and an agreement will be signed in time for the start of FATCA on January 01, 2014.
The Luxembourg government added that by signing up to FATCA, the nation’s financial services sector will remain competitive on the global stage.
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