What is the Foreign Account Tax Compliance Act (FATCA)?
The inception of FATCA was driven by growing concerns over the use of offshore accounts to evade U.S. taxes. Prior to FATCA, the U.S. faced significant challenges in tracking foreign income and assets, leading to substantial revenue losses. The need for a robust mechanism to enhance compliance and deter tax evasion became increasingly apparent.
The legislative journey of FATCA began in 2009 when the U.S. Congress, under the administration of President Barack Obama, recognized the growing issue of offshore tax evasion. The initial proposal for FATCA was introduced as part of the Hiring Incentives to Restore Employment (HIRE) Act, aimed at addressing both employment and tax compliance issues. After extensive deliberation, FATCA was officially enacted into law on March 18, 2010.