G20 Countries Cracking Down On Tax Evasion
Global tax evasion has become a top focus throughout the United States and the rest of the developed nations as countries struggle with lingering budget shortages that are a holdover from the 2008 crash and following recession. Countries are seeking to maximize their tax revenue by ensuring that people do not move money to foreign banks in order to avoid paying what is owed to the government.
Numerous steps have already been taken to prevent investors from failing to disclose foreign accounts and to ensure full revenues are being collected. From a requirement that US residents complete an annual Foreign Banks and Financial Accounts (FBAR) to the Foreign Account Tax Compliance Act (FATCA) imposing requirements on foreign banks and investment firms, these laws are having a profound impact on taxpayers. A Washington DC tax attorney can help you understand how these laws and future regulations will affect your banking relationships and can assist you in preparing for future changes to tax law.
The Plan to Fight Tax Evasion
According to the Guardian, G20 countries came to an agreement at the finance ministers meeting held in Australia. The discussion was surrounding a plan to automatically exchange tax information on a reciprocal basis. The countries aim to begin this information exchange no later than 2018.
Essentially, the process involves the periodic and systematic transmission of a bulk of tax payer information from the countries where the investments are kept to the country where the investor lives. When the country-of-residence receives information on dividends, interest and other income earned off-shore, it is simple to determine whether any tax has been invaded on an investment return or on the underlying sum of money. Even if tax administrations have not had previous evidence of non-compliance with tax laws, the receipt of this information will tip off the authorities to the fact that there are offshore accounts.
The ministers have asked all financial centers to commit by the end of October 2014 to support the new efforts that have been put in place to better monitor the implementation of the new cooperative standard of exchanging tax information.
The communique surrounding the commitment to exchange information stated that, “We support further coordination and collaboration by our tax authorities on their compliance activities on entities and individuals involved in cross-border tax arrangements."
The OECD reports that the value of the open and automatic exchange of information has become widely apparent in recent years. However, when major countries and financial centers worldwide come to an agreement to provide a reciprocal exchange of tax information, this can send ripples throughout the financial industry. Ex-patriots living abroad, for example, have had financial accounts closed because banks don’t want to comply with FACTA obligations to provide information on foreign accounts.
Individuals who have not filed appropriate reports or declared income off shore need to be prepared that information about their accounts may soon be coming to the attention of authorities. A Washington DC tax attorney should be consulted to learn about amnesty programs and other options for voluntarily reporting accounts that may not have been reported in the past.