Soon, foreign banks, investment funds and other financial institutions around the world will serve as stool pigeons and snitches for the Internal Revenue Service as part of a crackdown on tax evasion schemes by United States citizens.
The Treasury Department announced Monday that more than 77,000 institutions from nearly 70 nations will work with the IRS and share information about U.S. account holders with the tax collection agency, such as names, account numbers and balances for accounts.
The initiative, which will commence Mar. 2015, will target Americans who are withholding assets from Uncle Sam and countries such as the Bahamas, the Cayman Islands and Switzerland, will be participating. More than 500 Russian banks applied to the IRS directly to participate and their applications have been accepted.
Countries that refuse to participate face harsh penalties when doing business in the United States. The law orders American financial outlets to withhold 30 percent of particular payments to foreign banks that don’t participate in the program.
“The strong international support for Foreign Account Tax Compliance Act (FATCA) is clear, and this success will help us in our goal of stopping tax evasion and narrowing the tax gap,” said Robert Stack, deputy assistant treasury secretary for international tax affairs, in a statement.
If U.S. banks do not withhold the tax then they face liability as of July – recent notices suggest that the Treasury Department will give some banks additional time. Some of the withholdings consist of bonds and stocks.
More countries and financial institutions are expected to apply for the initiative within the next several months.
It was reported last month that 300 American Fortune 500 companies are holding approximately $2 trillion offshore in order to avoid paying the income tax rate imposed by the U.S. government. This has been a hot topic issue as many in Washington have attempted to pass legislation that would order these businesses, such as Microsoft, Google and Apple, and citizens to pay U.S. taxes.