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.