Regulation… regulation… sorry, what’s that? More regulation?

You think that tax evaders get away with it? Or that your reports as a Foreign Financial Institution (FFI) are not monitored? Well, think again!

FATCA and now CRS together with the Automatic Exchange of Information Reporting by FFIs is helping tax authorities like HMRC and the IRS clamp down on tax evasion. As an individual, you cannot be sued under FATCA or GATCA, but you will be prosecuted and fined under domestic law for tax evasion.

Individuals (especially US citizens) have a duty to submit their earned income, including foreign income (FBAR). Not only because it is the moral thing to do, but because your individual tax returns are matched to the reports that are supplied to the tax authorities by FFIs (who themselves have an even more invested interest in submitting their reports since the increase in penalties for failing to file, directly or indirectly depending on their jurisdiction) under FATCA and now CRS/AEoI. FATCA (IRC Chapter 4) is aimed at foreign financial institutions and US taxpayers with investments overseas, whilst CRS/AEoI (informally known as GATCA) is aimed at foreign financial institutions and taxpayers of that country with investments overseas. There are now 103 countries committed to AEoI.

As with all regulations, there are always changes and updates. One of the new changes is the W-8BEN-E form, which we will be posting about soon. There have been numerous news reports, from the US and the UK, of individuals being fined and sent to prison for tax evasion, tax fraud and failure to file tax returns. Here are just a few recent examples from across the board in the UK and US:

HMRC taskforces raise more than half a billion
Cheating chartered accountant jailed for tax fraud
HMRC’s response to the ICIJ story on offshore tax evasion
Texas artist sentenced to prison for failure to file income tax return
Pennsylvania periodontist indicted for tax fraud
Northern Carolina resident convicted of tax evasion
Texas woman sentenced to prison for tax fraud
Nevada dentist sentenced for tax fraud
North Carolina man sentenced for tax evasion and serving as a pilot without a licence

So FFIs, you should ensure you comply with FATCA and the pending AEoI in order to avoid fines by the IRS. Mistakes do happen and the IRS are human (it’s true, even though it’s hard to believe when you’re trying to ring their helpline and you get a recorded message) and if you, as an individual or FFI make an honest mistake, this can usually be fixed. We at TConsult recently helped one of our clients, an FFI who received a penalty notice whilst filing to the IRS, to get the penalty fine revoked. The notice was purely down to an administrative error but once this was cleared up and records amended, our client was able (with our help) to write to the IRS and have the fine revoked. This illustrates that the IRS (for FATCA) are monitoring the reports and taking action.

At TConsult Ltd, we can help your company in a variety of ways in order to prepare for your FATCA reporting, if you are interested, take a look at our GATCA Library website.