Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) is a United States law that requires foreign financial institutions to report information about their U.S. account holders to the Internal Revenue Service (IRS). The law was enacted in 2010 and went into effect in 2013.

FATCA is designed to prevent U.S. taxpayers from evading taxes by hiding their money in foreign accounts. The law requires foreign financial institutions to report information about their U.S. account holders, including their name, address, and account number. The information is then shared with the IRS, which can use it to audit U.S. taxpayers and ensure that they are paying their taxes.

FATCA has been controversial since its passage. Critics argue that the law is too burdensome for foreign financial institutions and that it could harm the U.S. economy by discouraging foreign investment. However, supporters of FATCA argue that the law is necessary to protect the U.S. tax base and that it has been effective in deterring tax evasion.

FATCA has had a significant impact on the global financial system. The law has led to the creation of new reporting requirements for foreign financial institutions and has made it more difficult for U.S. taxpayers to hide their money in foreign accounts. FATCA has also led to increased cooperation between the IRS and foreign governments in the fight against tax evasion.

Overall, FATCA is a significant piece of legislation that has had a major impact on the global financial system. The law is still in its early stages of implementation, but it is already having a positive impact on the U.S. tax base.