Reuters: Regulatory News: U.S.-Brazil tax deal advances anti-tax evasion dragnet -lawyers

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U.S.-Brazil tax deal advances anti-tax evasion dragnet -lawyers Mar 22nd 2013, 00:13 By Patrick Temple-West and Alonso Soto WASHINGTON/BRASILIA, March 21 | Thu Mar 21, 2013 8:13pm EDT WASHINGTON/BRASILIA, March 21 (Reuters) - The United States and Brazil are moving toward closer cooperation on fighting tax evasion, with Brazil recently ratifying a formal tax information exchange agreement between the two countries, tax professionals said on Thursday. After languishing in the Brazilian Senate for six years, the agreement, which provides for limited sharing of tax information, was approved last week, thus opening the door to a pact on the more comprehensive U.S. Foreign Account Tax Compliance Act, or FATCA. FATCA, the anti-tax dodging crackdown law approved in 2010, is being rolled out around the world by the U.S. Treasury Department via a series of inter-governmental agreements. The ratified tax information exchange agreement, or TIEA, "is very important for FATCA," said Bruce Zagaris, a tax lawyer with law firm Berliner, Corcoran & Rowe LLP. FATCA, which takes effect January 2014, will require foreign financial institutions to disclose to the United States information about Americans' accounts worth more than $50,000. The law puts the reporting burden on banks and investment funds, which could effectively be frozen out of U.S. markets if they fail to cooperate with the U.S. Internal Revenue Service. The inter-governmental agreements, or IGAs, allow home-country regulators of foreign financial institutions to serve as go-betweens with the IRS. Institutions whose home countries lack an IGA will be left to deal directly with the U.S. agency. The Treasury has completed IGAs with five countries: the UK, Denmark, Mexico, Ireland and Switzerland. Negotiations are under way with dozens more countries, including Brazil. The TIEA "is a big development in the context of FATCA," said Michael Mundaca, a former U.S. Treasury official who has negotiated tax matters with Brazil. He is now a senior executive at accounting giant Ernst & Young. "With every country that comes onboard, the pressure increases on those that have not yet made a decision to fully cooperate." U.S.-BRAZIL TAX TREATY PROSPECTS IMPROVE Brazil and the United States have no tax treaty, which helps global companies avoid double taxation. The United States has tax treaties with more than 60 countries, ranging from China and the UK to Bangladesh and Kyrgyzstan. Major companies such as Minneapolis-based Cargill and Brazilian planemaker Embraer have said the U.S.-Brazil TIEA is key to the two countries one day inking a tax treaty to end double taxation. "This information exchange is a first step ... We have never done that," U.S. Deputy Commerce Secretary Rebecca Blank told reporters during a trip to Brasilia earlier this week. She said it could take a year to 18 months before the countries start exchanging tax information. FATCA compelled Brazilian banks to lobby for the information-sharing deal and to get Brazilian authorities moving toward more U.S. cooperation. "FATCA has helped to engage the banking community" in Brazil, Zagaris said. Brazilian tax collectors pursuing criminal tax dodgers have already submitted requests for information to the United States, he said. "There's too much at stake in terms of their own desire to enhance tax enforcement," Zagaris said. Link this Share this Digg this Email Reprints

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