John Koskinen, commissioner of the US Internal Revenue Service, told a tax industry gathering in Washington on Monday that it made “sense for [the IRS] to move” in the direction of participating in the new automatic information exchange programme known as the Common Reporting Standard (CRS) – but that Congressional approval had to be obtained first.
Koskinen was quoted by various tax industry journals as saying that the reason the US hasn’t signed up to the CRS was because “we [the IRS] don’t have the legal authority to provide – on a reciprocal basis – the range of information the other countries are prepared to share with each other and with us.
“It’s going to be critical and in the interest of the United States to pass the necessary legislation to allow us to participate in the Common Reporting Standard,” he added, according to a report published by Bloomberg’s BNA news organisation, which specialises in covering tax and regulatory issues.
“We have an interest in American taxpayers to try to make sure that those systems run fairly and in the least burdensome way possible.”
Koskinen was speaking at a Tax Executives Institute conference in Washington.
According to LexisNexis.com, one of the publications to cover Koskinen’s remarks, there are “questions…about how much data the IRS can share about individual taxpayers under the existing statutory framework”.
But Koskinen insisted that the IRS was engaging in the OECD’s efforts to establish the reporting system, in spite of the fact that for now, it is not a signatory, nor likely to be for the foreseeable future.
As reported, some 50 “early adopter” jurisdictions have agreed to to implement the CRS as of the start of this year, with account information exchanging with other CRS signatories set to begin in 2017. Among the early adopters are such financial centres as Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, Jersey and the Isle of Man, some of which have been criticised in the past by politicians in the US, among other countries, for being “tax havens”.
In declining to sign-up to the CRS, the US has previously cited the existence of what it considers to be a sufficiently large network of intergovernmental information exchange agreements it already has in place around the world under the Foreign Account Tax Compliance Act (FATCA).
Some observers have suggested that the US, by remaining outside the CRS, would become a de facto tax haven, by virtue of the fact that its bilateral FATCA agreements don’t cover as many areas of information as the CRS will.
FATCA was signed into law by President Obama in 2010, in the wake of the global financial crisis and a scandal involving a Swiss bank that was found to have numerous significant and undeclared American bank accounts. It requires most foreign financial institutions to report to the IRS about any accounts they have that belong to Americans, resident anywhere in the world, worth US$50,000 or more.
Congressional approval
Koskinen didn’t go into detail in his address as to how the matter of obtaining Congressional approval might play out. However, it is known that legislation can take years to make its way through Congress (which is comprised of the US Senate and House of Representatives) and then get the signature of the president. What’s more, early versions of legislation similar in intent to that which eventually became FATCA failed several times to make it through Congress, and, some critics say, might not have in 2010, had it not been buried inside a domestic jobs bill, the HIRE Act, and thus received little attention.
Michigan Democratic Senator Carl Levin, for example, co-sponsored, with then-Senator Barack Obama, something called the Stop Tax Haven Abuse Act in 2005 and 2007. He tried again in 2011, and another effort was made in 2013, and then again last year by Representative Lloyd Doggett of Texas and Senator Sheldon Whitehouse of Rhode Island.
