U.S. financial institutions may see their reporting burdens rise as a result of a law designed to prevent taxpayers from hiding funds offshore.
The Obama administration is preparing to ask Congress for authority to demand more disclosure from U.S. banks to foreign governments about the American accounts of their citizens, Reuters reported on Tuesday.
The move arises from the administration's implementation of the Foreign Account Tax Compliance Act, which requires foreign banks to notify the Internal Revenue Service about accounts held by U.S. taxpayers. To force compliance, the law authorizes the U.S. to withhold 30% from proceeds on U.S. investments by banks in a non-compliant country.
The administration's anticipated request is said to be driven by promises being extracted by foreign governments, including China, Germany and France, which all say U.S. banks should have to reciprocate by handing over more information about their citizens in exchange for those countries doing the same, the news service reported.
A Treasury spokesman said in an email that the "U.S. is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperation to combat offshore tax evasion." The department declined to comment on proposals it may present to Congress.
Though the Treasury has forged bilateral agreements with roughly 60 foreign governments and jurisdictions to implement the FATCA's reporting and withholding provisions, the law will take effect next January regardless of whether bilateral pacts, which aim to facilitate reporting, are in place.