Treasury Letter to Sen. Rand Paul (R-Ky.) regarding FATCA IGAs

Mark J. Mazur, Assistant Secretary (Tax Policy), responded to Senator Paul’s letter regarding the joint statement that the Department of the Treasury issued with France, Germany, Italy, Spain, and the United Kingdom on February 8, 2012 (Joint Statement). Highlights from that letter:

  • Absent the cooperation of foreign governments, U.S. financial institutions would be required to withhold on payments to foreign financial institutions, and FATCA would fail to achieve its objective of fighting offshore tax evasion through increased information reporting;
  • The Organisation for Economic Cooperation and Development and the European Union would not be parties to any bilateral agreement for the implementation of FATCA, and neither organization would have any impact on whether the United States chooses to conclude a bilateral agreement with a particular country;
  • The United States cannot expect foreign governments with shared policy goals and practices regarding transparency and fairness to facilitate the reporting of the information required under FATCA by their financial institutions if we are unwilling to help address tax evasion under their tax systems;
  • Section 6103(k)(4) of the Internal Revenue Code authorizes the IRS to share information it collects with a foreign government, but only if the United States has in effect an income tax treaty or tax information exchange agreement with the foreign jurisdiction, and the reciprocal version of the IGA will be used only with foreign governments that the Treasury Department and the IRS have determined have robust protections and practices in place to ensure that exchanged information will remain confidential and will be used solely for tax purposes;
  • While the information that the United States would agree to exchange under the reciprocal version differs in scope from the information that foreign governments would agree to provide to the IRS, the reciprocal version includes a policy commitment to pursue equivalent levels of reciprocal automatic exchange in the future; however, no additional obligations will be imposed on U.S. financial institutions unless and until additional laws or regulations are adopted in the United States.
3 comments on “Treasury Letter to Sen. Rand Paul (R-Ky.) regarding FATCA IGAs
  1. Thanks so much for your summary of this response. We so often hear of letters being written by this Legislator or that, but seldom see the response. This of course raises as many questions as it answers, and wonder if Senator Rand Paul will respond. Do you happen to have a link to the letter, so I could read it? Thanks again for pointing it out, and summarizing for us.

  2. BTW, I did find the actual letter. Here it is for others that would like it.

    Also, note this comment

    “Like the United States , many foreign governments are trying to address offshore tax evasion by their residents and need information from other jurisdictions to support their efforts.”

    What it does NOT state, is the that the United States, like no other government in the world, is trying to address alleged offshore tax evasion of their “non-resident” citizens and therefore, unlike the United States, other governments have no need nor interest in receiving from the United States information in this regard. The foreign assets and any income derived from such assets of its non-resident citizens is of interest only to the United States, since the US is the only nation which subjects such income “no matter where they live”, which is already subject to taxation by the foreign jurisdiction, to simultaneous taxation by their country of citizenship.”

    FATCA obligates foreign jurisdictions provide the IRS with information on the financial assets of US overseas non-resident citizens and U.S. Persons, categories that other nations have no interest in the reciprocity of receiving with respect to their own overseas non-resident citizens.

    Perhaps it should be highlighted to Sen. Paul that the reciprocity interests of other countries are quite different than those of the United States as a result of the basic difference of what is taxable under the totally-unique citizenship-based tax laws of the US and the universally accepted residence-based tax laws of all other countries. The US is the only nation which unilaterally asserts the questionable “right” to levy and collect taxes from its non-resident citizens who reside within and whose income is derived from within the sovereign borders of other countries, even though this “right “may be considered by those other countries as a violation of their sovereignty.

    So, this IGA nonsense is truly “faux reciprocity”

    BTW, there was one other Country to tried to assert this Citizenship taxation right back in 1776, I think it was. How did that turn out?

  3. Pingback: The Isaac Brock Society - Washington Rep. Reichert questions IRS regarding FATCA IGAs

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