WASHINGTON, DC – Global Financial Integrity (GFI), a Washington, DC-based research and advocacy organization, urged Senator Rand Paul (R-KY) today to allow the U.S. Senate to vote on treaties negotiated by the U.S. with Switzerland, Luxembourg, Hungary, and other countries to implement the Foreign Account Tax Compliance Act (FATCA), ferreting out U.S. tax evaders. Senate rules allow any Senator to place a “hold” on legislation removing it from consideration, and Sen. Paul has placed holds on bills to implement every tax treaty negotiated since his election in 2010.
FATCA—adopted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act—requires foreign financial institutions to report information on the accounts of U.S. customers to the Internal Revenue Service (IRS), or a tax on all of the foreign bank’s U.S.-source income will automatically be withheld before being transferred to the bank. The U.S. Treasury is in the process of negotiating inter-governmental agreements with over fifty jurisdictions to streamline the process.
“The increased bilateral exchange of taxpayer information that these FATCA agreements create are crucial to cleaning up the worldwide shadow financial system, starting right here at home,” said Heather Lowe, legal counsel and director of government affairs at GFI. “The U.S. should not be a safe haven for the dirty money of foreign tax evaders, just as foreign financial institutions should not harbor the illicit assets of U.S. tax evaders.”
“Tax evasion and corruption siphoned $261 billion in illicit outflows from the Greek economy from 2003 to 2009, while draining another $138 billion from Portugal between 2005 and 2009, jeopardizing the economic well-being of America’s largest trading partner – Europe. More directly, tax haven secrecy costs American taxpayers $150 billion per year, just as government budget cuts are rippling through the American economy. The implementation of FATCA and the automatic exchange of tax information will go a long way toward curtailing tax evasion in the U.S. and in Europe,” explained Ms. Lowe.
International Momentum towards Automatic Exchange Depends on FATCA
Recent international events underscore the importance of FATCA implementation. The Group of 20 (G-20) nations recently reiterated its commitment to making automatic information exchange the “new global standard” and pledging to implement a multilateral system. The five largest European economies also recently announced the formation of a multilateral “pilot project” of automatic exchange, based on FATCA and the agreements those countries have negotiated with the U.S. Several more European nations have since joined the pilot, and a number of British Overseas Territories—including notorious tax havens such as Bermuda, the British Virgin Islands, and the Cayman Islands, among others—announced today that they would also be joining the program.
“There is an international movement for automatic exchange and FATCA is the driving force,” Ms. Lowe continued. “For the U.S., failing to fulfill our end of these agreements would undo all of the progress we have already made on this issue. Global progress should not be thwarted by the whims of one U.S. Senator.”
The National Foreign Trade Council and Organization for International Investment, who represent many major U.S. corporations, including the “Big Four” accounting firms, ExxonMobil, General Electric, and Microsoft, have also called upon Paul to drop his holds and resolve the uncertainty resulting from keeping the treaties in limbo.
“Ratification of the agreements has widespread support. Sen. Paul should stand with American businesses and American taxpayers and allow an up-or-down vote on the treaties,” stated Ms. Lowe.