According to haaretz.com, the online website of the Tel Aviv-based daily Haaretz, the governor of Israel’s central bank, Stanley Fisher, “is considering asking the cabinet to reach a tax agreement with the United States to calm Israeli banks” over the reporting requirements contained in FATCA (Foreign Account Tax Compliance Act), which is to begin taking effect next year.
More than 100,000 US citizens are estimated to live in Israel, which has strong ties with the US.
The haaretz.com report comes a little more than two months after the US Treasury Department issued a joint statement with the governments of France, Germany, Italy, Spain and the United Kingdom, which sets out a framework for an "intergovernmental approach" to international tax compliance generally, and the implemention of FATCA in particular.
As a result of this agreement, banks in those countries do not have to reach separate agreements with the IRS, which some experts have said could cause confidentiality problems in some countries. As the Haaretz.com report suggests, other countries are considering similar arrangements, as the FATCA deadlines for implementation approach, and the US has said that it would welcome them.
Tax crackdown motive
As reported, FATCA was signed into law in 2010 by president Obama with the intention of cracking down on the use of foreign bank accounts by Americans to avoid their US tax obligations.
It requires foreign financial institutions to report to the US government on the bank accounts and other holdings of all US taxpayers, including expatriates who hold other passports and who may not have set food in the US for decades.
FATCA awareness growing
Awareness of FATCA is growing in Israel, the haaretz.com report notes. Last week, for example, Tel Aviv-based Bank Leumi announced that all of its American clients “must declare by the end of April that they have reported their bank accounts to the US tax authorities”, or face having their Israeli accounts frozen at the beginning of May, haaretz.com says, adding that other Israeli banks are also beginning to make similar requests.
However, it continues, “implementing the US demands without explicit instructions from the Bank of Israel exposes Israeli banks to sticky issues regarding client confidentiality”.
To read the Haaretz report, click here.
