Treasury hammers out tax-evasion agreement with Japan, Switzerland

The Treasury Department announced Thursday it had reached an agreement with Japan and Switzerland on helping foreign banks met pending U.S. regulations aimed at hunting down American tax evaders hiding money abroad.

The statements of cooperation offer a framework for how the United States and foreign nations will cooperate to implement the Foreign Account Tax Compliance Act (FATCA), a law enacted in 2010 to help the government hunt down Americans trying to evade taxes by placing funds in foreign accounts.

“FATCA is an important part of the U.S. government’s effort to improve tax compliance. The intergovernmental framework announced today provides a second model for implementing FATCA in a way that addresses domestic legal impediments and reduces burdens on financial institutions,” said Emily S. McMahon, the Treasury's acting assistant secretary for tax policy.

The Treasury had previously reached an understanding with France, Germany, Italy, Spain and the United Kingdom on intergovernmental information-sharing under the law.

Under the new agreements, foreign financial institutions in those nations would deal directly with the U.S. government in providing information on American accountholders. Governments would interact if the United States requested specific information on certain accounts.

Under the law, foreign banks are required to hand over information about Americans’ accounts to the IRS, and face a 30 percent withholding fee on certain payments received from the United States if they don’t comply.

The regulations also stretch out the reporting requirements for the law, which is scheduled to go into effect in 2013.

Under the new rules, banks would have to report the identities, account balances and other information on U.S. accounts in 2014 and 2015.

By 2017, banks would have to supply full reports, including income associated with U.S. accounts and gross proceeds from broker transactions.

The government is still finalizing the regulations for FATCA, and Treasury officials expect to have them finished by this fall.