International Tax Transparency: A New Way of Banking

Newly appointed IRS Commissioner John Koskinen has made clear that a top priority for the IRS is eliminating the practice of U.S. taxpayers concealing money in offshore accounts specifically for the purpose of tax evasion. At the U.S. Council for International Business-OECD International Tax Conference held in Washington, DC on June 3, 2014 Koskinen detailed at length the current measures undertaken by the IRS as well as future courses of action to enforce, encourage, and collaborate with banks across the globe to disclose all financial-related information on their U.S. account holders including investments and other business dealings. According to a report issued by Bloomberg Daily, Koskinen is one of the many people that believe in the promotion of fairness within the U.S. tax system and as Commissioner, has committed himself to bringing to justice the wealthier taxpayers who exploit the voluntary compliance aspect of our tax system by instead stashing their income overseas, unreported to the IRS.

Throughout his remarks at the conference, Koskinen reiterated over and over the notion that “international tax transparency is no longer a distant hope but rather an immediate reality” thanks in large part to the Foreign Account Tax Compliance Act also known as FATCA. Enacted by Congress in 2010, FATCA, which will become effective on July 1st, is a multi-faceted piece of legislation spearheading the crackdown on offshore tax evasion. As a part of its more aggressive enforcement policies encouraging foreign banks to disclose their U.S. account holders, FATCA allows for the imposing of significant penalty fees on any business transactions conducted in the U.S. by those foreign banks that refuse to disclose information on their U.S. account holders . According to ThinkProgress, as a part of its more diplomatic enforcement policies, “FATCA has established a process for the U.S. government to strike direct information-sharing agreements with foreign governments.” To date, nearly 70 countries have already entered into such agreements with the U.S. The Offshore Voluntary Disclosure Program (OVDP) developed in 2009 by the IRS, in which U.S. taxpayers can voluntarily come into compliance and disclose their offshore accounts, is another one of FATCA’s less aggressive strategies.

One can infer that, between the 77,000 different foreign banks across the globe that have come forward with information on their U.S. account holders as of June 1st, and the 100+ Swiss banks that are already in cooperation with the U.S. Department of Justice, as reported by ThinkProgress, Mr. Koskinen and the global tax administrators community are indeed on their way to eliminating bank secrecy for foreign account holders.