Thursday, February 14, 2013

Treasury, Switzerland Sign Agreement to Combat International Tax Evasion

The Treasury Department announced today that it has signed a bilateral agreement with Switzerland to facilitate the implementation of the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act.

“Today’s announcement marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion,” said Acting Secretary of the Treasury Neal S. Wolin. “We are pleased that Switzerland has signed a bilateral agreement with us, and we look forward to quickly concluding agreements based on this model with other jurisdictions.”

Enacted by Congress in 2010, FATCA targets non-compliance by U.S. taxpayers using foreign accounts. The bilateral agreement signed today is the first based on the model published in November of 2012.

According to PWC:
FATCA, which was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010, requires financial institutions to use enhanced due diligence procedures to identify US persons who have invested in either non-US financial accounts or non-US entities. The intent behind FATCA is to keep US persons from hiding income and assets overseas.

A foreign financial institution (FFI) could face significant consequences if it fails to enter into an agreement with the Internal Revenue Service (IRS), which is merely the first step; the ability to align all the key stakeholders, including operations, technology, risk, legal, and tax, will be paramount to successfully comply with FATCA. The institution would be subject to a 30% withholding tax on any “withholdable payment” made to its proprietary account for failing to comply with FATCA.

In addition, accountholders who don’t provide the FFI with FATCA-required documentation would be deemed recalcitrant. The FFI would then be obligated to deduct a 30% withholding tax on any withholdable payment credited to their accounts.

Of additional note: As stated above, this was slipped in Obama's HIRE Act, which was promoted at the time as a jobs creation Act. Here's how CBS News reported Obama's signing of the Act:
President Obama today signed into law a $17.5 billion jobs bill that he said will spur hiring and help small business owners.

In signing the bill, called the HIRE Act, the president said that while government can't be the only solution to address lagging employment in the wake of the recession, it can serve to "promote a strong, dynamic private sector" that can drive job creation.

The bill includes $17.5 billion in tax cuts, business credits and subsidies for state and local construction bonds, and moves $20 billion into the highway trust fund for spending on highway and transit programs. It exempts businesses that hire unemployed workers from paying the payroll security tax through December of 2010.[...] The president laid out four planks of the jobs bill in his Rose Garden remarks. He said:

The bill mandates that payroll takes will be forgiven for businesses that hire someone who has been unemployed for at least two months; 
It will permit small businesses to write off investments they make in equipment this year;
It will reform municipal bonds to expand investment in schools and clean energy;
And it will continue roadway infrastructure investment into the spring and summer, when, the president said, construction jobs pick up.

Huh, no mention of  FATCA, must have slipped the President's mind or, more likely, as crony capitalist and war profiteer, David Rubinstein (co-founder of Carlyle Group) once told me relative to some other legislation, "The devil is in the details," and the President and his propaganda machine are never going to discuss the details.


  1. Berlin Wall 2.0:
    "Bricks and Mortar" are so passe', go virtual!

    1. @Capn Mike:

      So true. Bitcoin is the new "secret bank account".

    2. Until they hack it and render it useless.