Tuesday, January 11, 2011

The U.S. proposes transparency on foreign money

The U.S. Treasury Department has issued proposed regulations that would require banks in the United States to report to the U.S. Treasury annually all interest income paid to nonresident aliens.

This is potentially a very big deal. And we are delighted to see Tax Analysts reporting this:
"The government said that requiring routine reporting to the IRS of all U.S. bank deposit interest paid to any NRA is appropriate because in the years since the 2002 proposed regs were released, there has been a growing global consensus on the importance of cooperative information exchange. Such reporting "will further strengthen the United States exchange and information program, consistent with adequate provisions for reciprocity, usability, and confidentiality in respect of this information," the government said."
At present, banks in the United States have to report only interest income paid to U.S. persons and nonresident aliens who are residents of Canada. If these new regulations come into effect (and that is by no means certain), this would mean the U.S. government would provide the U.S. Government with the information it needs or would need to comply with foreign information exchange requests, and to exchange information automatically.

This would be a very significant step forward in the process toward automatic exchange of tax information between governments.

The banking lobbyists whose clients profit from handling illicit money that flows to the U.S. in search of financial secrecy (and other attractions) will scream about this. This was proposed in the dying years of the Clinton administration, and was shot down by the banking lobby, and our good friends at the Center for Freedom and Prosperity (CF&P) are promising another fight this time around. A hearing on it is due in April.

We strongly hope this makes progress and that the CF&P don't get their way. We won't hold our breath just yet.

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