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Global Tax Evasion Compliance Deadline Nears
Author: Scarinci Hollenbeck, LLC
Date: July 11, 2013
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In one of the largest coordinated global tax evasion strategies in history, the United States is on pace to open up registration to foreign financial firms that service U.S. clients on July 15, 2013.
The financial industry continues to lobby for more time and the Internal Revenue Service has not yet released registration procedures and guidelines. However, the U.S. government is still set to begin enrolling investment companies, banks, and insurance groups in its registry in an effort to further the Foreign Account Tax Compliance Act (FATCA) of 2010 and significantly cut down on multimillion-dollar tax law violations, Reuters reports. Foreign financial institutions are required to complete registration by October 25 to avoid penalties that will be levied beginning on January 1, 2014.
Many financial institutions and industry professionals argue that registration may be severely stunted, however, if the U.S. Treasury fails to put up guidelines and further instruction immediately. Some anticipate registration backlogs as a result of these delays, and others contend that the IRS may be forced to delay the implementation of penalties if they don’t put up instructions quickly enough, Reuters reports. The Treasury Department – which delayed FATCA requirements in the past – has not yet said whether it plans to postpone the upcoming deadline.
Separately, it appears that many Americans with foreign accounts are withdrawing funds at faster rates ahead of the new law. For example, Israeli banks estimate that American clients have withdrawn roughly $4 billion from their institutions over the last two years, a move they attribute to tighter tax scrutiny, Israeli news source Globes reports.
“The blow is not just in the drop in assets, but also in the drop in investments,” a banking source told Globes. “Some of these customers, especially the wealthy ones, use the money to make investments and acquisitions in Israel. There is now little chance that they will make these investments, after they moved the money back to the U.S.”
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