FATCA: High-Cost Initiative To Curb Tax Evasion
Published on 30 Sep, 2015
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Enacted by the United States Congress in March of 2010, the Foreign Account Tax Compliance Act (FATCA) is a federal law meant to deter tax evasion.
Arguably one of the US government's most controversial mandates in recent times, the act aims to curtail routes that wealthy investors and corporations usually take to stash money in tax havens abroad.
In agreement with 112 countries, FATCA calls for greater reporting compliance and information sharing among multiple tax jurisdictions, impacting various stakeholders in the value chain, from governments, banks, and financial institutions, down to IT and consulting firms, as well as individual US citizens.
The act will allow the US government to identify American taxpayers who have accounts at foreign financial institutions (FFIs) and enforce reporting of those accounts; compelling investors and institutions to reconsider investments and ways of doing business.
The act is not without its pitfalls however; the cost of compliance, implementation, and other legalities may prove to be an impediment to collecting taxes from offenders.
Although financial institutions would be hard-pressed to implement FATCA-friendly systems and procedures, the US government as well as IT and consulting firms would stand to gain.
Whether it achieves its purpose or falls short, FATCA's efficacy is sure to be tested in the years to come.