The Obama administration may soon ask Congress for the power to require more disclosure by U.S. banks of information about foreign clients' accounts to those clients' home governments, as part of a crackdown on tax evasion.
As Treasury has implemented FATCA, some countries - possibly including France, Germany and China - were said to be driving a hard bargain. They have been saying that if their banks have to tell the IRS about Americans' secret accounts, then U.S. banks should have to reciprocate by disclosing more information about the U.S. accounts of French, German and Chinese nationals.
China has been publicly dismissive of FATCA, but it is talking with U.S. officials behind the scenes, sources said. "The People's Republic of China may be particularly interested in a reciprocal exchange of FATCA information," said Karl Egbert, a lawyer with law firm Dechert LLP in Hong Kong.
France and Germany "have been asking for something more like full reciprocity," said Jonathan Jackel, a lawyer with the law firm of Burt Staples & Maner LLP in Washington, D.C.
The United States already shares some taxpayer information with foreign countries with which it has a tax treaty or a formal information-sharing agreement.
The Treasury Department has acknowledged that more information sharing would be appropriate. The completed FATCA pacts include commitments "to pursue equivalent levels of reciprocal automatic exchange in the future," according to an October 2012 letter from Treasury Assistant Secretary for Tax Policy Mark Mazur to members of Congress.
The IRS this year started disclosing to some foreign governments information about bank interest payments earned by their citizens with U.S. bank accounts. This has raised privacy concerns, particularly for Mexican nationals.
"The United States should be moving toward full reciprocity," said Georgetown Law School Professor Itai Grinberg, a former Treasury official, adding it would be "deeply hypocritical" of the United States to ask for U.S. taxpayer information "without offering some kind of reciprocity."
Contact the Tax Lawyers at Marini & Associates, P.A.
Read more at: Tax Times blog