Common Reporting Standard, Part 1: What is It?
The international tax landscape has changed radically in recent years.
The IRS enforcement crackdown on offshore account reporting is only one aspect of this. Also looming large of course is passage by Congress of the Foreign Account Tax Compliance Act (FATCA) and the intergovernmental agreements worked out by the Treasury Department to enforce it.
But there is another global change afoot that could also have far-reaching effects: adoption of a common global standard for information-exchange among revenue agencies. In this two-part post, we will discuss that standard.
The emerging global standard is called the common reporting standard (CRS). More formally, it is the Standard for Automatic Exchange of Financial Account Information.
It was developed by the Organization for Economic Cooperation and Development (OECD) and the Global Forum on Transparency and Exchange of Information for Tax Purposes.
The underlying idea is similar to FATCA: to prevent tax evasion by using improved information-sharing among revenue agencies across borders in order to monitor compliance with tax laws.
More than 100 countries have signed on to participate in the CRS when it goes into operation. The U.S. is not among them.
Though it will not formally take effect until September 2017, the CRS has already prompted some taxpayers around the world to address their tax compliance issues.
The U.S. has not signed on to CRS. In part, this may be because the U.S. already has FATCA. In part two of this post, we will discuss considerations that affect U.S. adoption of CRS and how they relate to FATCA.
