Share The Wealth: Billionaires, look out: U.S. looks to crack down on tax evasion

STEFFEN SCHMIDT / The Associate Press

Boris Collardi, CEO of Swiss bank Julius Baer Group, gestures Feb. 6 during a news conference in Zurich, Switzerland. The bank has cautioned investors that the outcome of a U.S. probe into whether it helped American clients cheat on their taxes is uncertain.Click here to purchase Reveille photos.

Benjamin Franklin once said nothing in this world is certain but death and taxes.
For many of our nation's wealthiest individuals, the taxes part doesn't hold true.
If the U.S. is successful in molding tax-evasion legislation into a more business-friendly format for foreign financial institutions, that won't hold true.
Last week, Congress won critical support from five leading European nations in an attempt to identify offshore accounts by residents of the United States.
The Treasury Department said Wednesday the U.S. government has signed a joint agreement with France, Germany, Italy, Spain and the United Kingdom to intensify their efforts in fighting international tax evasion. In return, Washington will "reciprocate in collecting and exchanging" information about U.S. accounts held by residents of those countries.
The Treasury also made public Wednesday that the IRS is putting forth rules that investors will have to follow in reporting on earnings from foreign bank accounts.
Both the agreement and regulations originate from the Foreign Account Tax Compliance Act, known as FATCA, which became law as part of a 2010 jobs bill.
This is how it works: Under the new proposals, firms in FATCA-partnering countries will not be required to enter into a detailed agreement with the IRS, but only register with the taxing authority.
What this means, essentially, is that FATCA will require foreign financial institutions to divulge information regarding any kind of account held overseas by residents of the U.S. This information will be important in making sure U.S. residents are in full tax compliance involving foreign financial assets and offshore accounts.
According to a 2009 congressional research service report conducted by Jane G. Gravelle, a senior specialist in economic policy, the federal government loses both individual and corporate tax revenue from the shifting of profits and income into low-tax countries — estimated to be around $100 billion per year.
This is an enormous amount of revenue the federal government could use to reduce deficits, increase spending on education and reinvest in programs that spur economic growth.
Unfortunately, this lost revenue figure can be misleading because it includes countries that are not within the FATCA agreement, such as Switzerland, China, Japan and Canada — countries that are frequently used by wealthy individuals and multinational corporations to avoid taxes.
In order for FATCA to be effective, it is essential that every country which possesses major financial institutions is included in the agreement. If not, individual and corporate entities will just move their money into non-participating FATCA countries where their money will continue to escape the reaches of Uncle Sam.
The U.S. needs to make this law more appealing.
Currently, FATCA requires that virtually every financial institution in the world report any accounts held by Americans, with a withholding penalty for noncompliance. The punishment is a withholding charge of up to 30 percent on any income and capital payments the company gets from the U.S.
The European Commission estimates the cost of compliance will be $100 million for each multinational bank — which is ridiculous.
If the U.S. really wants FATCA to be successful, they should try to incentivize people to join, not punish them.
Another issue that needs resolution.
Initially, FATCA required that financial institutions share private account information with the U.S. government. Obviously, this method of attaining information would infringe upon national secrecy laws.
There has been recent discussion of being able to get around the secrecy problem by having financial institutions share data with their own governments, which would then share with Washington.
This needs to happen.
The European Commission welcomed the government-to-government approach, saying it would greatly reduce "the administrative burden, compliance costs and legal difficulties."
FATCA has the potential to be a great law and generate tens of billions of dollars in untapped revenue.
However, in order for FATCA to be effective, it needs to be designed in a business-friendly manner and to include all major financial players.
Jay Meyers is a 19-year-old economics freshman from Shreveport. Follow him on Twitter @TDR_jmeyers.