This creates a hole in the accounts that Trump plans to fill by lowering the rate of corporate tax to 15% from 35%, imposing a 10% repatriation tax on accumulated profits of foreign subsidiaries of US corporations, and taxing the future profits of those foreign subsidiaries.
While lowering the corporation tax may incentivise some companies to repatriate to the US, it is not clear how many companies will take up the offer, which could make Trump’s budget deficit even larger.
Targeting US expats could be one solution, which could make a repeal of Fatca less likely.
Offshore disclosure
OVDP offers taxpayers with undisclosed income from foreign financial accounts and assets an opportunity to get current with their tax returns and information reporting obligations.
The programme encourages taxpayers to voluntarily disclose foreign financial accounts and assets now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.
Fatca came into effect on 1 July 2014 and is targeted at US taxpayers that have overseas assets and income and opted not to use OVDP.
“The IRS has passed several major milestones in our offshore efforts, collecting a combined $10bn with 100,000 taxpayers coming back into compliance,” said IRS commissioner John Koskinen. “As we continue to receive more information on foreign accounts [via Fatca and other means], people’s ability to avoid detection becomes harder and harder. The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”
Fatca has been widely criticised by US expats and financial institutions due to the onerous reporting requirements that make it difficult and expensive for financial institutions to serve US citizens.
An attempt to halt the introduction of Fatca in Israel was overturned in September, despite claims that the legislation violates the country’s basic law on human dignity and liberty.
