Blocked treaties a concern ahead of tax evasion law: TreasuryPublished:
A lone Republican lawmaker blocking Senate votes on several tax treaties is a concern, but won't stop a new anti-tax evasion law from taking effect in 2014, a Treasury Department official said on Tuesday.
Republican Senator Rand Paul's hold on the treaties "is a concern" isolated to "a few agreements" with foreign governments, said Jesse Eggert, associate international tax counsel at Treasury, at a conference.
"I don't think this is a big-picture concern" for the Foreign Account Tax Compliance Act (FATCA), he said.
FATCA is aimed at curbing tax avoidance by Americans. The 2010 law requires most foreign banks and investment funds to report to the U.S. Internal Revenue Service information about U.S. customers' accounts worth $50,000 Or more.
Paul in May introduced legislation to repeal parts of FATCA, citing privacy concerns.
The Kentucky Republican's hold on tax treaties adds another headache for Treasury, which has already struggled to implement FATCA.
Paul is preventing a Senate vote on a Swiss tax treaty and at least two others.
The treaties, including one with Switzerland, are needed to help implement side-deals that Treasury has negotiated with several governments over FATCA, Eggert said.
The U.S.-Switzerland FATCA deal, known as an intergovernmental agreement (IGA), requires a change to an existing U.S. tax treaty to facilitate exchanging information between the two countries.
A spokeswoman for Paul did not respond to requests for comment on Tuesday. Paul has previously declined to answer questions about his tax treaties hold. Under Senate rules, a single senator may block a vote on a measure.
While steep FATCA penalties for financial firms that do not comply will begin in 2014, account reporting to the IRS will not begin until 2015, Eggert said.
That means there is still time for the treaties to gain Senate confirmation. "Ideally, the sooner the better for those treaties coming into force, but we do have some time," he said.
Eggert said the United States might be able to use a tax information exchange agreement (TIEA) with other countries to exchange information for FATCA. A TIEA does not require Senate ratification and is considered a first step toward a comprehensive tax treaty.
Foreign financial institutions, eager for their governments to sign FATCA deals with the United States, will soon overwhelm Paul and his stance against the tax treaties, said Georgetown Law School Professor Itai Grinberg, a former Treasury official.
"Rand Paul will not succeed" in obstructing the treaties indefinitely, Grinberg told Reuters. "It will no longer be in his interest to be a single preventer of treaty ratification."
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