Big brother’s long arm of the law.
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The United States has signed agreements with the Cayman Islands and Costa Rica to help those countries’ banks comply with an anti-tax evasion law starting next year, the Treasury Department said on Friday.
The deals are part of the US effort to enforce the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010 and is set to take effect in July 2014. FATCA requires foreign financial institutions to tell the US Internal Revenue Service about Americans’ offshore accounts worth more than $50,000. It was enacted after a Swiss banking scandal showed that 17,000 US taxpayers had hidden substantial fortunes overseas. On Thursday a former UBS banker, Raoul Weil, agreed to be extradited to the US to face charges arising from that scandal.
With these two deals, both signed this week, the Treasury has now finished 12 FATCA “intergovernmental agreements” (IGAs), which help countries’ financial institutions comply with the law.
The FATCA agreement with the Cayman Islands was initially agreed to in August. The island territory of 53,000 people has no income tax and is frequently labelled as a tax haven by critics. It is one of the world’s most popular destinations for investment funds to organise for tax purposes.