This article looks at the latest adjustments of the FATCA legislation that continues to affect the compliance functions of banks around the world.

The US FATCA legislation continues to affect countries around the world. This article looks at the global picture.

The world recently took another step towards a unified personal tax-collection regime last month when Spain and then Germany signed agreements to co-operate with the US Foreign Account Tax Compliance Act on the 14th and 31st of May and Singapore promised to do the same in the near future.

Under such agreements, which come into effect in January, each non-exempt financial institution in the co-operating country and the US will tell its home tax authority about the financial accounts of customers who are citizens of the other. The home tax authority will then share the information with its overseas counterpart in a standardised way.

High-net-worth individuals are going to be a favourite target for the Internal Revenue Service as, it believes, they are more likely to cheat the taxman than anyone else. This is because a great deal of their income is self-certified and a great many of them are entrepreneurial “chancers”. The IRS estimates that Americans underpay their taxes by about $345 billion every year, according to Barron's, the financial news website and magazine. The IRS collected about $65 billion of enforcement revenue in the financial year of 2011 – nearly 13 per cent up on the previous year's figure of $57.6 billion, which itself was 18 per cent up on the $48.9 billion of 2009. This process required the employment of thousands of revenue officers, agents and special agents. The IRS says that its staff in “key enforcement occupations” rose in number from 20,203 to 22,184 between 2001 and 2011.

Some eight countries have so far signed intergovernmental agreements in respect of FATCA with the US. These are the UK (which signed first on 12 September 2012); Denmark and Mexico (November); Ireland (January); Switzerland (February); Norway (April); and Germany and Spain (May); with Singapore to follow soon. All follow the text of a pre-existing US model agreement (see link below) almost word-for-word. The carve-outs or exemptions that the US has allowed in each case are sparse to say the most.