FATCA 2 Ready In Global Crackdown On Tax Cheats

A new global standard for governments to crack down on tax evasion has been released by the Organisation of Economic Cooperation and Development (OECD).

Almost 70 countries have already signed up to the charter, which will roll out a US style Foreign Account Tax Compliance Act (FATCA) law globally.

FATCA started on July 1, 2014 and requires offshore financial providers to report the financial affairs of US taxpayers to the Internal Revenue Service (IRS) each year.

The OECD version aims to draw back the veil on banking secrecy for individuals, companies and trusts who try to hide money outside their home countries to avoid paying the right amount of tax.

The Standard for Automatic Exchange of Financial Account Information in Tax Matters is a blueprint tax treaty for governments.

Nowhere left to hide

The standard calls for financial institutions to automatically give their local tax authorities account information on all customers for onward transmission to their home states.

The agreement is designed to help tax authorities compare tax returns or identify undeclared income held offshore.

Financial information, says the OECD, includes:

Bank and investment account balances

Details of interest paid on savings and investments

Dividends paid by offshore companies

Information about any proceeds raised from selling assets

All customers, including individuals, companies, trusts and foundations are caught in the tax information net.

“Governments asked us to draft the standard to fight tax fraud and evasion,” said OECD Secretary-General Angel Gurria. “We hope this work will leave tax cheats nowhere left to keep their money and assets in secret.

“The message we want to send is that the network is ready for implementation and anyone who has not declared their full financial status should consider sorting out their affairs straight away.”

Undeclared wealth

The standard will be rubber-stamped by G20 finance ministers when they meet in Cairns, Australia, in September.

The network and information exchange is expected to go live sometime in 2017, to give member nations the time to implement monitoring.

“We already have 65 nations signed up to take part in the network and expect many more to join over the next few months,” said Gurria.

More than 120 countries and financial jurisdictions are playing an active part in FATCA, and all are likely to join the OECD network.

The OECD says that more than 500,000 taxpayers have volunteered previously undeclared financial income and assets to their tax authorities since FATCA and the OECD standard were announced.

These disclosures have resulted in governments raising more than £21 billion worldwide in extra tax revenue.