Despite more nations signing up to the US Foreign Account Tax Compliance Act (FATCA) and reams of guidance issued to financial institutions, some doubters still suggest the law will not go ahead as planned.
The US government has already pushed the start of FATCA back six months, but is steadily rolling online registration and instructions for financial institutions on exactly what they have to do to comply with FATCA.
The tally of FATCA nations signed up to the tax sharing law now stands at 18, with negotiations underway with between 40 and 50 others.
As the law is promoted and supported by the Organisation of Economic Co-Operation and Development, it seems reasonable to believe most of the OECD’s 34 members will join the network.
Indeed, many already have.
Tax havens toppled
The G8 and G20 leading developed nations also cross-over into the OECD, so expect many of them to sign on the dotted line as well.
FATCA represents a sea change in the way governments look at cross-border taxation.
Instead of legislating over what happens within their own borders, governments are now sharing tax information about companies and individuals on a global basis.
Much of the preparatory work has been about making so-called tax havens toe the FATCA line. The US, UK, France and Germany turned the screws on Switzerland to remove the country’s legendary banking secrecy.
Other dominoes toppled as Swiss banks closed, paid billions of dollars in fines and caved in to FATCA.
These smaller fish, like the Isle of Man, Cayman Islands, Bermuda, British Virgin Islands and the Channel Islands have all come in from the cold as well leaving tax evaders few places to hide.
Global tax network
FATCA allows nations within the network to track companies and individuals in other countries who should be paying them tax.
Not only will signatories to FATCA agreements feed information about US taxpayers with overseas cash and holdings to the US Internal Revenue Service, the IRS will send similar data back to participating nations.
That means anyone with more than $50,000 in cash or assets in an overseas financial institution will have their personal and financial details shipped to their home government.
FATCA is the first step in pulling the strands of this worldwide tax sharing network together.
The law allows countries and the US to share information, but does not let Singapore send data to the UK, for instance.
The European Union is already discussing a compulsory tax data sharing network for the 28 member nations – and it won’t be long before the rest of the world follows suit.