2 research outputs found
I Got 99 Problems and They’re All FATCA
Offshore personal income tax evasion accounts for approximately $50 billion in annual lost revenue for the United States. These large sums of money are squirrelled away in tax havens—jurisdictions, such as Aruba, the Cayman Islands, and Dubai, whose laws allow some U.S. citizens to evade paying their U.S. income taxes. Before the Foreign Account Tax Compliance Act (FATCA) was enacted, U.S. citizens could avoid taxes on passive income by not reporting this income to the Internal Revenue Service (IRS). To detect tax evasion, the IRS pursued U.S. citizens with undeclared assets in foreign banks. But the IRS’s quest was largely unsuccessful because foreign financial institutions did not fully report U.S. account holders’ information. While the IRS occasionally discovered offshore accounts, U.S. taxpayers were largely on the “honor system.” Unfortunately, many U.S. taxpayers with offshore accounts have been dishonest. As a result, Congress brought the hammer down with FATCA to combat and, more importantly, prevent tax evasion. This Comment discusses FATCA’s provisions, particularly those that have been heavily criticized. It then explores these criticisms from a domestic and foreign perspective. In doing so, this Comment examines and endorses Intergovernmental Agreements (IGAs) as (1) a solution to FATCA’s shortcomings and (2) a building block for developing a sustainable model of international tax transparency and information reporting. Finally, this Comment argues that the United States should continue working with the Organisation for Economic Co-operation and Development towards the adoption of a multilateral automatic information exchange standard that will enhance tax transparency and reduce tax evasion at an international level
I Got 99 Problems and They’re All FATCA
Offshore personal income tax evasion accounts for approximately $50 billion in annual lost revenue for the United States. These large sums of money are squirrelled away in tax havens—jurisdictions, such as Aruba, the Cayman Islands, and Dubai, whose laws allow some U.S. citizens to evade paying their U.S. income taxes. Before the Foreign Account Tax Compliance Act (FATCA) was enacted, U.S. citizens could avoid taxes on passive income by not reporting this income to the Internal Revenue Service (IRS). To detect tax evasion, the IRS pursued U.S. citizens with undeclared assets in foreign banks. But the IRS’s quest was largely unsuccessful because foreign financial institutions did not fully report U.S. account holders’ information. While the IRS occasionally discovered offshore accounts, U.S. taxpayers were largely on the “honor system.” Unfortunately, many U.S. taxpayers with offshore accounts have been dishonest. As a result, Congress brought the hammer down with FATCA to combat and, more importantly, prevent tax evasion. This Comment discusses FATCA’s provisions, particularly those that have been heavily criticized. It then explores these criticisms from a domestic and foreign perspective. In doing so, this Comment examines and endorses Intergovernmental Agreements (IGAs) as (1) a solution to FATCA’s shortcomings and (2) a building block for developing a sustainable model of international tax transparency and information reporting. Finally, this Comment argues that the United States should continue working with the Organisation for Economic Co-operation and Development towards the adoption of a multilateral automatic information exchange standard that will enhance tax transparency and reduce tax evasion at an international level