Find It and Tax It: From TIEAs to IGAs

Abstract

Today, more than ever the battle against tax evasion is taking a center stage in the global political agenda. Hence, leading countries are intensifying their efforts and adding tools to assist in the pursuit of information concerning the international business activities of their taxpayers. The efforts to reveal illicit money are being undertaken through independent initiatives, or under the auspices of the OECD. Currently, the U.S. employs three methods to reveal its taxpayers’ offshore income: TIEAs, bilateral tax treaties, and FATCA/IGAs. In our opinion, FATCA has in fact been buried by the IGAs. However, we still believe that both FATCA and the IGAs have had an enormous psychological effect on taxpayers. Our view is not only supported by the record number of U.S. citizens who renounced their U.S. citizenship in 2014, but also by the popularity of the Offshore Voluntary Disclosure Program offered to U.S. taxpayers.

We believe that relying on IGAs rather than on FATCA will change little in the field of exchange of information at the government level: Namely, those countries that have always been willing to co-operate with the U.S. will continue in this manner, and those who have imposed difficulties (i.e. Swiss) will continue to do so. However, at the bottom of the pyramid, the escalating law-enforcement exposes the unwillingness of more and more taxpayers to pay with their freedom by being locked up in prison, where their money can no longer be part of any game.

Keywords: FATCA, IGAs, exchange of information

JEL Classification: H26