Americans Helping Americans Abroad

Last year the IRS provided its first substantial summary of the data collected from foreign banks under FATCA legislation (National Bureau of Economic Research Working Paper 31055, March 2023).

The working paper contains a great deal of hard data relating to the scale of offshore financial investments of US households (nearly all relating to 2018). It also provides evidence about the scope for raising revenues by combating tax evasion on associated income and by levying fines. This FATCA data should lead to reconsideration of conventional wisdom in Washington about “offshore evasion” that has for years been based on guesswork and back-of-the-envelope calculations.

Unfortunately, the report is dense, challenging for many readers, and has not received the attention it merits. It has had little impact on public debate. AARO Banking Committee Chairman Paul Atkinson has tried to make the results more accessible by filtering the report and extracting the main information that it contains or implies.

The results, presented as a slide show, are summarized in slides 4-7 and then grouped into three sets: (1) offshore wealth, associated income and tax liabilities of identifiable individuals: (2) what we can say about the ultra-rich, i.e. the top 0.01% of the income distribution; and (3) the scope for revenue recovery by IRS.

Key takeaways from the report include:

• Only about 60% of account information from FATCA reports can be matched to owners.

• Less than half of the value of these matched accounts can be identified to specific U.S. individuals.

• Less than half of the wealth submitted in FATCA reports generates passive income (interest, dividend, capital gains), so taxable income from them is relatively small compared to the total wealth reported.

• Any large-scale revenue recovery to the U.S. government will come from fines due to late or inaccurate reporting, not from recovered tax evasion.

pptxFATCA Summary