Will GATCA Replace FATCA?
The IRS has been struggling for several years to launch FATCA, the Foreign Account Tax Compliance Act. Passed by Congress in 2010, the law seeks to compel banks and other financial firms worldwide to closely examine their account base and report those accounts with ties to the IRS. Uncle Sam thinks FATCA will help it collect billions of dollars each year from taxpayers who are hiding untaxed money offshore.
While owning a foreign account is completely legal, U.S. Treasury laws say that many offshore assets must be reported annually. The IRS says that any income from offshore assets is taxable.
Failure to report a foreign bank account can be a felony (if the failure to disclose was “willful”) and in most cases carries tremendous civil penalties. Those penalties are up to the greater of $100,000 or 50% of the highest historic account balance. These penalties are per account and in certain rare cases, have been imposed per year.
The only reason FATCA works is because of the worldwide financial clout of the U.S. economy. The IRS and Congress can’t regulate foreign banks but they can make it expensive for banks that don’t comply to do business here.
Enter GATCA. At this point “GATCA” – short for the Global Account Tax Compliance Act – is a concept and not an actual law or draft law. The Organisation for Economic Co-Operation and Development (OECD for short) is pushing for greater global financial transparency. Ever since FATCA arrived on scene, the OECD has been pushing for GATCA.
So what is GATCA? At this point, the plan calls for every nation to set up an automatic exchange of information. Any time an account is opened, the new account data would be immediately provided to the account holder’s home country. If there were multiple holders or signers, the information would be reported to each.
GATCA received a big boost this week when the head of the OECD, Jose Angel Gurria, told an audience in Brussels that GATCA will be ready in two years. More importantly, he claims that “The governments will have to take decisions then, but the G20 and the G8 is fully behind it.”
The G8 and G20 nations represent the world’s largest economies: the United States, South Africa, China, Canada, Mexico, Brazil, Argentina, France, Germany, Australia, Great Britain, South Korea, Russia, Japan, Italy, India, Indonesia, Saudi Arabia and Turkey. The European Union is also a member. By saying that all the big countries of the world are behind GATCA means it has a great chance of becoming law.
According to Gurria, “This [GATCA] makes sure there is nowhere to hide. Billions have gone into the world’s treasuries because people know the likelihood of getting caught is higher.”
With Gurria claiming that all twenty G20 members have signed, its likely that GATCA is coming. Until then, FATCA is probably here to stay as well, at least for the short term.
What should you do if you are an American or U.S. taxpayer with unreported foreign accounts? The first step is to thoroughly educate yourself. We recommend speaking with an experienced lawyer or accountant well versed in IRS offshore reporting rules. There are plenty of options and even some amnesty programs but time is running out for some of those.
The IRS tax attorneys at Mahany & Ertl will gladly provide confidential, no-fee initial consultations to help answer your questions and explain your responsibilities. Thereafter, most services can be provided on a reasonable flat fee. We also help foreign financial institutions comply with FATCA.
For a free consultation, contact one of our experienced FBAR lawyers today; attorney Bethany Canfield at or by phone at (414) 223-0464. The author, Brian Mahany, can also be contacted at or (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and will be answered within 1 business day. (We also have hundreds of text searchable posts on our Due Diligence blog.)
Mahany & Ertl – America’s FBAR and Foreign Reporting Attorneys. Our services are provided worldwide.