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Treasury proposes regulations to limit the US being used as a tax haven
The US enacted the Foreign Account Tax Compliance Act (FATCA) to uncover US persons who were hiding money in offshore financial institutions and similar investment vehicles. Taxand USA investigates further.
To incentivise these foreign institutions to cooperate, the IRS threatened them with a stiff withholding tax on most payments generated from the United States. As a result, these institutions spent millions of dollars in a massive compliance effort to set up the infrastructure to capture and report the information to the US government.
While many business organisations and governments were not happy with FATCA, it is now accepted as just another piece of a much wider regulatory net in the global push for tax transparency and compliance. Nonetheless, tax authorities and non-governmental organisations abroad have questioned and criticised the US for imposing FATCA on the rest of the world while not doing enough to curb the use of the US as a tax haven.
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