Continuing a U.S. crackdown on the offshore tax evasion, the U.S. Treasury Department said on Thursday that Switzerland and the United States have signed a pact to make Swiss banks disclose information about U.S. account-holders.
The Inter-Government Agreement (IGA) is the latest in a series between the United States and other countries designed to carry out the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010. In signing the pact, Switzerland joins Britain, Denmark, Ireland and Mexico as countries that have finished FATCA IGAs with the United States.
The U.S.-Swiss agreement requires Swiss banks to sign up directly with the U.S. Internal Revenue Service, while giving the banks a way to avoid violating Swiss financial secrecy laws. The Swiss deal does not require Swiss banks to automatically give the IRS account-holder information if the U.S. client refuses to cooperate, however, the IRS can still get that information via Swiss government authorities. The Swiss pact excludes Swiss social security, pension funds and some insurers from FATCA. The Swiss deal is not reciprocal, meaning the IRS will not provide Switzerland with information about Swiss citizens’ accounts in U.S. banks.
FATCA requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans’ offshore accounts worth more than $50,000. FATCA was enacted after a Swiss banking scandal showed U.S. taxpayers hid millions of dollars overseas. FATCA imposes steep penalties beginning in 2014 on financial institutions that do not comply with the law. Banks and other financial institutions failing to comply could be frozen out of U.S. financial markets.
Luxembourg, Austria, Japan and Italy are believed to be working on separate IGAs with the United States.