The Foreign Account Tax Compliance Act Will Fail To Curb Tax Evasion
Tax administration is experiencing a global upheaval. The 2010 passage of the Foreign Account Tax Compliance Act (FATCA) – which includes costly demands on foreign financial institutions to report information on US clients to the IRS and large penalties for noncompliance – marked a new era of fiscal imperialism. Wealthy nations taking it upon themselves to define the rules by which the rest of the global community must abide are now declaring victory in their quest to establish a new global tax regime. Deputy Secretary Neal Wolin, for instance, cheered the recently finalized FATCA rules as “a critical milestone in international cooperation.” But the celebration is premature, as significant obstacles stand in the way of the global tax elite’s quest to eradicate tax competition.
Following closely on the heels of FATCA, the G20 and the OECD started developing their own new tax information sharing standards. Recently, the OECD finalized a Common Reporting Standard, which would require the routine sharing of bulk financial information between governments. OECD Secretary-General Angel Gurría trumpeted the standard as “a real game changer” that would allow governments to “ramp up international tax co-operation” in order to “fight tax evasion.”