We know that large amounts of money all over the world are kept elsewhere”, or “other where”, and go untaxed as Taxpayers fall short of complying with their tax obligation in their home jurisdictions. We also know that FATCA was established to fight tax evasion from U.S.A. individuals and entities via the use of foreign accounts. FATCA has a long reach and a substantial sign-up sheet. However, the U.S.A. is not the only jurisdiction looking for tax evaders. Tax evasion is a global problem. FATCA has served as the catalyst in propelling the Organisation of Economic Cooperation & Development (OECD) to introduce the Common Reporting Standard (CRS). Net net, the CRS will facilitate the automatic exchange of tax information between non-U.S.A. countries. The OECD is known for its quest to promote tax cooperation and improve all forms of information exchange — on request, spontaneous and automatic. Currently, there are 61 signatories that belong to the elite Early Adopters Group, and a total of 94 jurisdictions that have made the commitment to exchange information.
Under the single global Standard, jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. It consists of two components: a) the CRS, which contains the reporting and due diligence rules to be imposed on financial institutions; and b) the Model Competent Authority Agreement, which contains the detailed rules on the exchange of information. The new Standard draws extensively on earlier work of the OECD in the area of automatic exchange of information. It incorporates
progress made within the European Union, as well as global anti-money laundering standards, with the intergovernmental implementation of FATCA. CRS has been designed to prevent Taxpayer avoidance. It has three fundamental pillars:
- The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income), account balances and sales proceeds from financial assets.
- The financial institutions that are required to report under the CRS include banks, custodians, brokers, certain collective investment vehicles and certain insurance companies.
- Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the Standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.
It is clear that tax compliance is a global priority. Finding a place to hide is becoming increasingly difficult for those taxpayers that try to outsmart the authorities. FATCA is already 5 years old, alive and kicking. Electronic files have already been exchanged with the I.R.S. CRS has an implementation timetable of 2017 or 2018.
By Stanley Foodman CPA
Foodman CPAs and Advisors
* 1201 Brickell Avenue * Suite 610 * Miami, Florida 33131
Tel 305 365 1111 * Fax 305 365 2244 *www.foodmanpa.com*
Stanley I. Foodman is CEO of Foodman CPAs & Advisors in Miami, Florida and a recognized forensic accountant and litigation support practitioner. Specializing in complex domestic and international tax matters, he has served as an expert witness and forensic accountant for some of the nation’s most challenging, high-profile economic crime cases. He and his team of accountants also assist clients with a full range of accounting matters including compliance, voluntary disclosure, corporate and individual taxation, family law litigation, estate and trust tax and wealth planning. Consistently ranked as one of the top accounting firms in South Florida, Foodman CPAs & Advisors assists clients locally, nationally and internationally.
Published article can be found at: http://www.theyucatantimes.com/2016/01/crs-and-fatca-both-intend-to-combat-tax-evasion/