U.S. signs agreement with the Caymans to curb tax evasion
Newscast Media WASHINGTON—The United States has signed agreements with the Cayman Islands and Costa Rica to implement the Foreign Account Tax Compliance Act (FATCA), the U.S. Treasury Department said November 29. The bilateral pacts represent the first FATCA agreements in the Caribbean and Central America.
The department said on its website November 19 that “FATCA is rapidly becoming the global model for combating offshore tax evasion and promoting transparency.”
“Today’s announcement marks a milestone in the effort to promote global tax transparency,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “These agreements underscore growing international cooperation in the effort to end tax evasion everywhere.”
FATCA, enacted in 2010, seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions that do not agree to report information on U.S. account holders. The foreign institutions have the option of entering into agreements directly with the Internal Revenue Service (IRS), the U.S. government agency responsible for tax collection and tax law enforcement, or through one of two alternative agreements signed by their home country.
The Cayman Islands signed a “Model 1B agreement” November 29, meaning that financial institutions there will be required to report tax information about U.S. account holders directly to the Cayman Islands Tax Information Authority, which is the sole channel in the Cayman Islands for sending tax-related information to other governments. The Cayman Islands Tax Information Authority will relay that information to the IRS. Additionally, the Treasury Department said, the United States and the Cayman Islands signed a new Tax Information Exchange Agreement to replace one signed in 2001.
“By working together to detect, deter and discourage offshore tax abuses through increased transparency and enhanced reporting, we can help build a stronger, more stable and accountable global financial system. We look forward to collaborating with the government of the Cayman Islands to further these objectives,” said Julie Nutter, minister-counselor for economic affairs at the U.S. Embassy in London, who signed on behalf of the United States.
The Costa Rica agreement was signed November 26 and is a “Model 1A agreement,” meaning that the United States will also provide tax information to the Costa Rican government on Costa Rican citizens with accounts in the United States.
“Today’s signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion — an objective that mutually benefits both our countries,” said Gonzalo R. Gallegos, chargé d’affaires of the U.S. Embassy in Costa Rica, who signed on behalf of the United States.
In addition to the 12 FATCA agreements that have been signed to date, the Treasury Department said, it has also reached 16 agreements in substance and is engaged in related conversations with many more jurisdictions.