U.S. outlines regulations to combat overseas tax evasion

The U.S. Treasury Department on Wednesday announced proposed regulations to prevent Americans from dodging taxes through foreign accounts.The regulations implement a 2010 law enacted by U.S. Congress to fight offshore tax evasion. The law requires foreign financial institutions to report to the Internal Revenue Service (IRS), the U.S. tax collector, information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.The regulations lay out a step-by-step process for foreign financial institutions to comply with the law. The foreign financial institutions are required to enter into an agreement with the IRS to identify U.S. accounts, report certain information regarding U.S. accounts and withhold a 30-percent tax on certain payments of U.S. source income.The Treasury said the regulations will allow time for foreign institutions to develop necessary systems and resolve local law limitations to which they may be subject."When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden," said Emily S. McMahon, Treasury's acting assistant secretary for tax policy. "We believe these efforts will serve as a complement and catalyst to the ongoing global efforts to combat offshore tax evasion," she added.The Treasury Department said it also issued a joint statement with France, Germany, Italy, Spain and the United Kingdom to intensify cooperation in combating international tax evasion.