The U.S. signed a collaborative agreement with the Cayman Islands and Costa Rica last week to combat offshore tax evasion under the Foreign Account Tax Compliance Act.
“Today’s announcement marks a milestone in the effort to promote global tax transparency,” Deputy Assistant Secretary for International Tax Affairs Robert B. Stack said. “These agreements underscore growing international cooperation in the effort to end tax evasion everywhere.”
Enacted in 2010, FATCA seeks information on accounts held by American taxpayers in other countries. The law requires U.S.-based financial institutions to hold a portion of payments to foreign financial institutions that do not agreed to report information on their U.S. accountholders.
Financial institutions seeking to join in the effort can either enter into a direct agreement with the IRS or comply through one of two model agreements signed by their home country.
Under the agreements signed last week, financial institutions in the Cayman Islands will be required to report information directly to the country’s Tax Information Authority, which will relay the information to the IRS. Costa Rican authorities will provide information on U.S. accountholders to the IRS, and the U.S. will reciprocate.
“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,” Julie Nutter, the minister-counselor for economic affairs at the U.S. embassy in London, who signed on behalf of the U.S., said. “We look forward to collaborating with the Government of the Cayman Islands to further these objectives.”