U.S. Agrees to Revise Foreign Account Reporting Model

After negotiations with its European Union counterparts in Paris last week, U.S. tax authorities have agreed to propose changes to the way that foreign income is reported due to concerns voiced by banks and governments that the current model breaches privacy and is unnecessarily complex, according to the Financial Times.

The talks are set in an environment where the U.S. has begun cracking down on the use of offshore bank accounts that authorities believe are being used to commit tax evasion. The U.S. has engaged in a number of high profile battles with international financial institutions in order to get information on American account holders, such as its hard-fought court case against Swiss bank UBS, which eventually resulted in a deal to reveal thousands of anonymous account holders to the IRS. More recently, the U.S. has also demanded that another Swiss bank, Credit Suisse, also reveal its account information.

The Swiss cases are representative of the problems that banks are having with the U.S.’s aggressive tax enforcement policies. Compliance with the U.S. in its enforcement efforts may run afoul of their own county’s privacy laws, a point that was frequently brought up by the Swiss banks during their struggles with the IRS, as well as the administrative burden that comes with reporting such information to U.S. tax authorities.

During the talks, the U.S. agreed to revise its foreign income reporting regime to streamline the process for banks. According to the Financial Times, the IRS is expected to roll out new regulations that will focus mainly on larger accounts. Generally, the agreement will allow European banks to give information on U.S. account holders to their own regulators who will, in turn, pass along the information to Washington. No word, however, on when these new regulations will be released.