U.S. agencies are no longer taking a hard line solely on Americans' bank accounts to ensure they're in compliance with tax law. In the coming weeks, lawmakers are expected to ask U.S. banks to begin disclosing information on foreign clients' accounts, which will then be handed over to those foreigners' home governments, according to a special report from Reuters.
The suggestion has already prompted a backlash from U.S. banks, but the Treasury Department argues that it may serve as a quid pro quo scenario to help further the information-sharing agreement between the U.S. and other foreign governments. The terms of the Foreign Account Tax Compliance Act, or FATCA, will go into effect this year, but many countries - most notably France, Germany and China - are pushing back against U.S. authorities for more reciprocal information-sharing terms. These countries have argued that if their banks have to tell the IRS about Americans' secret accounts, then U.S. banks should have to reciprocate by disclosing more information about the U.S. accounts of French, German and Chinese nationals, Reuters reports.
Under the current agreement, non-U.S. banks, investment funds and other financial entities are required to disclose information on American accounts whose balances exceed $50,000. Those who fail to comply with FATCA may be prevented from participating in U.S. markets.
"The United States is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperation to combat offshore tax evasion," said a Treasury spokesman, according to Reuters.
The U.S. is facing a tax gap of $385 billion, a large projected percentage of which stems from tax evasion and other unlawful activity from offshore account holders. The U.S. is currently working with a smaller budget for catching tax evaders, but has continue to ramp up efforts by bolstering existing voluntary disclosure programs and forging deals with other nations to help detect and prosecute those who skirt federal tax law.