The U.S. Department of the Treasury and the government of France have partnered up to combat egregious tax law violations carried out through the use of offshore accounts, the federal department said.
Photo by NeONBRAND on Unsplash
The two countries have signed an intergovernmental agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA). IGAs have been instrumental in helping countries establish information-sharing procedures and processes that allow them to detect, investigate, and prosecute potential tax evaderswho have hidden taxable income in offshore tax havens. Under the IGA, financial institutions in France will be required to report tax information about U.S. account holders directly to the French government, which will in turn relay that information to the IRS. The IRS plans to reciprocate with similar information about French account holders.
According to the Treasury Department, 10 IGAs have been signed so far.
“France has been an enthusiastic supporter of our effort to promote global tax transparency and critical to drafting a model of FATCA implementation,” said Deputy Assistant Secretary for International Tax Affairs Robert Stack. “This agreement demonstrates the growing global momentum behind FATCA and strong support from the world’s most important economies.”
Several other countries – including Denmark, Germany, Ireland, Norway, Spain, and the United Kingdom – have also signed IGAs. Other countries, such as Japan and Switzerland, have also engaged in agreements to a lesser extent that will help facilitate information sharing and support FATCA. However, there is still a long way to go in encouraging more countries to cooperate with the new law, especially those who have regarded client confidentiality as a critical factor in attracting foreign customers. However, those that fail to comply with the provisions outlined in FATCA risk being frozen out of U.S. financial markets.
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