Tax Evaders Worry about FATCA Deadline

By Dec 31st, 2013, all FIIs (Foreign Financial Institutions) that are required to register with the IRS must do so. They are also required to begin reporting to the IRS. Noncompliance attracts heavy penalty. Switzerland is warning its banks to consider the payment of penalties charged for letting Americans evade taxes. 

Switzerland’s financial regulator is advising banks that are facing tax evasion charges in the U.S. to keep aside millions that they might need to pay in penalties. A state-backed Swiss bank kept aside $112 million to fight a legal battle and to pay fines incurred due to a Department of Justice probe. In 2014, the IRS might crack down upon foreign financial institutions (FIIs) that do not comply with FATCA regulations.

The U.S. has made agreements with the governments of many countries, and is continuing to make new agreements. On Thursday, the U.S. Treasury Department made anti-tax evasion agreements with the governments of Bermuda, the Netherlands, Malta and three U.K. Crown Dependencies. These jurisdictions were used as tax havens. In late November, the U.S. made FATCA agreements with the Cayman Islands and Costa Rica. 

The U.S. has made remarkable progress in making agreements under FATCA. It has already made agreements with many important countries and tax havens, including France, Costa Rica, Germany, Spain, Switzerland, Cayman Islands, Denmark, the U.K., Mexico, and Ireland. To improve tax compliance, the IRS is also running its Offshore Voluntary Disclosure Program (OVDP) for the U.S. taxpayers.   

Strict implementation of FATCA is expected to recover billions of dollars in lost revenue. Apart from the tax money that was lost to the treasury due to tax evasion, the IRS can also expect to receive a substantial amount in penalties. The recent efforts by the U.S. to curb tax evasion are strong enough to drastically bring down tax evasion.

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