By disclosing income of wealthy US citizens which they stash inSwitzerland, India, Israel, Hong Kong, Singapore and elsewhere, theauthorities plan to enrich the federal budget by up to $5 billion,according to estimates from lawyers who are tracking variousprobes. So far, US officials have won back $5.5 billion in unpaidtaxes and penalties in the past four years.
US tax officials are greatly relying on Foreign Account Tax andCompliance Act, or Fatca, a federal law that was approved in 2010and takes effect in 2014. Fatca will force foreign institutions todisclose the names of customers who are US taxpayers withoutfail.
Countries or individual companies can sign agreements to abideby Fatca rules. In case they decline to sign on for joint battle,then US companies, investment firms and banks must withhold 30% ofpayments such as dividends to account holders.
Nine countries so far have signed or provisionally approvedFatca agreements with the US, while another 40 are in negotiations,according to publisher Tax Analysts, the Wall Street Journalreported.
However, experts say it's unlikely China, which includes theSpecial Administrative Region (SAR) of Hong Kong, will comply withthe act. It is also unlikely the US will impose the 30% tax.
"This has more to do with politics than taxes," RobertGoulder, a lawyer with Tax Analysts, told the Wall Street Journal.A Treasury spokeswoman says the department "has engaged with Chinaand will continue to do so."
