The US Internal Revenue Service (IRS) has ticked another two more countries off the list of nations signing up for the Foreign Account Taxation Compliance Act (FATCA).
FATCA aims to gather financial information about US taxpayers who hold $50,000 or more in foreign accounts.
To bypass privacy and data protection laws in many countries, the IRS is drawing up intergovernmental tax treaties that allow foreign financial institutions to pass financial information about their American customers to their national tax authority.
This information then goes to the IRS for comparison with tax returns, while similar information about the other nation’s taxpayers who have accounts in the US goes the other way.
Caymans and Bahamas join FATCA
The Cayman Islands has announced negotiations over an intergovernmental FATCA agreement and tax information exchange agreement with the US have ended.
Both governments have initialled the agreements that clear the way for the automatic exchange of tax information.
Cayman’s Minister for Financial Services Wayne Panton: “Signing these agreements shows that we want to be a part of the international tax system and that our transactions are transparent and without secrecy.”
In the Bahamas, the Ministry of Financial Services is about to put to tender the work of installing a FATCA reporting system by December.
“FATCA is drafted in US tax and legal terms and we need to translate that into common law language that everyone can understand,” said ministry director Nicole Virgill-Rolle.
The government is also opting to sign an intergovernmental FATCA agreement with the US.
Kuwait fund managers worried about FATCA penalties
Investment fund managers in Kuwait have asked the country’s central bank and stock exchange to give financial institutions clear guidance on how then nation is to implement FATCA.
Meanwhile, Kuwait does not have a FATCA deal with the US, and local financial institutions are concerned they may face penalties unless both governments come to an agreement soon.
“Many governments have acted to exchange tax information under FATCA that will be monitored by state institutions and will safeguard their sovereignty and financial sectors,” said a spokesman for the Union of Investment Companies in Kuwait.
The Central Bank of Kuwait put out a circular in June 2012 confirming local financial institutions do not have the authority to release customer financial information to third parties without written permission from their US customers.
The UIC commented that the government should be taking steps to negotiate an agreement with the US over FATCA on their behalf – and pointed out governments in Bahrain, Jordan and United Arab Emirates are already in such discussions.
We the real ‘tax havens’ should be part of FATCA. If the IRS has a hope in hell to sign China it will be ‘a very watered down’ IGA. China is in the driving seat and the Chinese know it.
Has FATCA made it harder for those of us who reside outside the US? Yes.
But the blame should be placed on those who hid their assets and
income, not on the US government for finally forcing those evaders to
pay their share for the benefits of their US citizenship. Should FATCA
have been limited to the real fat cat evaders? Yes – the $50,000 limit
is pitifully small. Should FATCA have simpler rules for those US
citizens legally resident outside the US, allowing them to maintain
financial accounts in their country of residence? Yes. But do away with
FATCA entirely, and allow wholesale tax evasion once again?
Emphatically no.
There is no need to harm the innocent if one seriously wishes to act against crime. It is, after all, the innocent whom one seeks to protect from crime. Harming the innocent because of crime, only causes more crime.
FATCA could have easily been defined to exclude innocent Americans living abroad while focusing on the stateside tax cheats that it was designed to catch.
@GlobalCapitalism:disqus – Obviously you are a Homelander.
FATCA should be used for known ‘tax havens’ such as the Cayman Islands. People do not move to Europe to save on tax. The US needs to move to resident based taxation like the rest of the G20.
As for the benefits of US citizenship, in 2013 there are not as many as you may think. The standard of living in many countries is the same as the US and in many cases higher. The US’ infrastructure is in a terrible state.
no I am not a Homelander quite the opposite and believe me with the exception of CH the infrastructure is in a terrible state everywhere else too ! But no – I am not renouncing nor will my wife who is a dual passport holder because this whining and complaining is getting ridiculous. It is a myth that complying with your tax obligations will cost you $2-5000.00 depending on your facts of course. We are paying approx. $500 per year and our AGI is in the 7 figures. Keep in mind that for every expatriation there are > 100 naturalizations. We have lived and worked abroad for 26 years now but our checking and savings accounts have not been closed. We still have a mortgage with the same bank and no problem keeping our brokerage account open. It is a myth that life altering fines and penalties await those that make errors in reporting all foreign accounts through FBARs or since 2011 Form 8938. The IRS has widened the guidelines for their Streamlined Program that does NOT raise any civil penalties. It is not new that you have to pay taxes on any worldwide income but it is being more enforced now . Cheating is cheating with or without FATCA – there is no de minimis exception. Of course there is always a very small minority that faces tougher challenges than others and some collateral damage to a global initiative has to be expected.
It is wonderful that America is eager and excited to replace each American patriot with 100 unknown immigrants. America is not known for having any respect or appreciation for its diaspora and America has the right to define its immigration policy according to its interests.