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Washington’s tax offensive

07.10.2011

In light of the United States debt crisis that played out in Washington DC this year, it’s not surprising that the US Internal Revenue Service is trying to clamp down on tax abuse.

The US government is trying to find every dollar it can. One way the US has hit on is to scour the planet to find US citizens resident in other countries to make them pay their dues. The mechanism for this initiative is the Foreign Account Tax Compliance Act, also known as FATCA, which is due for phased implementation from mid 2013.

FATCA essentially aims to get all financial institutions in the world to identify and report to the IRS on their US customers. Of course the US government cannot require global compliance with its law, but it wields a hefty stick to encourage ‘voluntary’ agreements between foreign financial institutions and the IRS through severe tax consequences.