Excerpt taken from the article
Washington/Zurich - The Treasury Department said on Thursday it had reached tentative agreements with Switzerland and Japan to help banks in those countries comply with upcoming U.S. tax evasion regulations.
U.S. tax collectors are on track to begin penalizing foreign banks in 2014 for failing to disclose information to government authorities about clients who are U.S. citizens. Foreign banks have fretted about this, with some saying they could not comply due to domestic privacy laws.
Thursday's agreements offer a compromise in which banks in Switzerland and Japan could meet U.S. and domestic regulatory demands by reporting some data directly to the U.S. Internal Revenue Service and other data to home governments.
The Swiss and Japanese deals expand the the list of countries already cooperating with Treasury to implement the U.S. Foreign Account Tax Compliance Act, or FATCA, a 2010 anti-tax evasion law.
Treasury said in February it was negotiating with France, Germany, Italy, Spain and Britain to set up government-to-government information-sharing deals.
When the IRS starts collecting taxpayer data from abroad, it can check the data against information from individual U.S. tax returns to see if Americans are dodging taxes by hiding assets overseas and not reporting them to the IRS.
FATCA is particularly problematic for Switzerland, which has a tradition of strict bank secrecy. But the Swiss government said it would allow banks to comply and report accounts to U.S. authorities by granting an exception to Swiss criminal law.
"Ultimately, the purpose here is to force voluntary compliance," said Scott Michel
, a tax lawyer with Caplin & Drysdale. "You're going to see this be the model for FATCA compliance going forward." Click here to read about the rest of the article on US agreements with Japan and Switzerland on FATCA implementation