The Low Post News

Foreign Banks Sharing Information in Tax Evasion Crackdown

Over 77,000 banks outside the U.S. have agreed that they will share information regarding account holders from the U.S. as part of the U.S. Treasury Department’s offshore tax evasion crackdown.

The list of banks includes over 500 in Russia. The Russian banks were required to apply directly to the Internal Revenue Service since the U.S. broke off its negotiations with the country over an agreement for information sharing after the actions taken by Russia in Ukraine.

Close to 70 countries agreed to share the banking information as part of a new law in the U.S. that is targeting Americans that hide assets overseas.

The participating countries include the world’s financial behemoths, as well as places where people from the U.S. have traditionally hid their assets like the Cayman Islands, the Bahamas and Switzerland.

Under the new law, foreign banks not agreeing to share the banking information with the IRS will face penalties when they do business inside the U.S.

The law requires banks in the U.S. to withhold 30% of certain types of payments to the foreign banks that are not participating in their program, which is quite a price for access to the largest economy in the world.

The law, passed in 2010 is referred to as FATCA, which is for Foreign Account Tax Compliance Act. It is designed to encourage, while others say force, banks outside the U.S. to share their information about account holders from the U.S. with the IRS, which will make it difficult for U.S. citizens to use accounts overseas to hide their assets and evade taxes in the U.S.

Under the new law, banks in the U.S. that do not withhold the 30% tax would be liable themselves, a strong incentive to comply with the law.

Banks in the U.S. will start withholding the 30% in July, though recent Treasury Department guidance gives some leeway on that timing.

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