Holy See, U.S. sign historic accord against tax evasion.
(Vatican Radio) The Holy See and the U.S. have signed a first-ever inter-governmental economic accord aimed at fighting tax evasion. Vatican Secretary for Relations with States, Archbishop Paul Gallagher – acting also on behalf of the Vatican City State – and the U.S. Ambassador to the Holy See, Kenneth Hackett, signed the agreement in the Vatican on Wednesday.
International tax compliance, exchange of tax information
The accord, the first formal inter-governmental agreement between the Holy See and the United States, implements new rules to improve international tax compliance and exchange of tax information in view of the U.S. Foreign Account Tax Compliance Act (FATCA). It concerns U.S. citizens who hold accounts and conduct financial activities in the Vatican bank, IOR (Institute for Works of Religion).
FATCA provisions were passed in the U.S. as part of the Hiring Incentives to Restore Employment Act (HIRE Act) in 2010 to target noncompliance with U.S. tax obligations by U.S. taxpayers using foreign accounts. FATCA requires U.S. taxpayers who own financial assets outside of the United States to report the fair market value of those assets to U.S: tax authorities.
To date, some 62 countries have signed FATCA agreements with the United States and a further 50 have agreements in substance with the U.S.
Under the new regulations, the IOR will adopt an automatic reporting system concerning accounts held by U.S. taxpayers.
Ambassador Hackett: a “seal of approval” on Vatican’s transparency efforts
Speaking to Vatican Radio, Ambassador Hackett expressed his satisfaction with the accord, saying it also puts a certain stamp of approval on the Holy See’s efforts over recent years to improve the transparency and accountability of its financial apparatus.
“Certainly we are pleased with the steps that the Vatican has taken to improve issues of transparency and oversight and accountability. This new agreement that is being signed today is a step in the process. And it is a seal of approval – I think for any financial transaction, it’s a process that you’ve got to stay with and you can’t let down your accountability system. So we’re very happy and pleased that they have taken this step.”
Ambassador Hackett points out that the new agreement is part a global effort to encourage greater transparency in the banking sector and to combat money laundering, terrorism and tax evasion.
“Particularly tax evasion,” Ambassador Hacket stresses. “There are other mechanisms that the Vatican has agreed to on money laundering, on counter-terrorist financing but we are over-all pleased with the way the Vatican has stepped up and really tried to model good behavior.”
Building on a series of Vatican-U.S. accords
Wednesday’s accord builds on cooperation between the Holy See’s Financial Intelligence Authority (AIF) and Vatican City State with U.S. agencies. The AIF has signed interagency agreements for information exchange with the Financial Crimes Enforcement Network and the U.S. Office of the Comptroller of the Currency.
In May 2013, the AIF signed a Memorandum of Understanding with the Financial Crimes Enforcement Network of the U.S. Treasury Department in Washington, D.C.
In July 2014, the AIF signed an agreement to share information with the U.S. Office of the Comptroller of the Currency.
Below, we publish the joint press release issued at the Vatican Wednesday:
The Holy See and the United States Sign an Agreement to Fight Tax Evasion.
June 10, 2015 – Today, the Holy See’s Secretary for Relations with States, Archbishop Paul Gallagher, and the U.S. Ambassador to the Holy See, Kenneth F. Hackett, signed an historic agreement between the Holy See (acting also in the name and on behalf of the Vatican City State) and the United States of America to improve international tax compliance and exchange of tax information in view of the U.S. Foreign Account Tax Compliance Act (FATCA).
This agreement – which is the first formal inter-governmental agreement between the Holy See and the United States – underscores the commitment of both parties to promote and ensure ethical behavior in the financial and economic fields. In particular, this agreement will prevent tax evasion and facilitate the compliance of fiscal duties by those U.S. Citizens who conduct financial activities in Vatican City State.
Ensuring the payment of taxes and preventing tax evasion are of crucial economic importance for every community since adequate tax revenues and public spending are indispensable for governments to become instruments of development and solidarity, to encourage employment growth, to sustain business and charitable activities, and to provide systems of social insurance and assistance designed to protect the weakest members of society.
In a context of economic globalization, it is therefore essential to strengthen the exchange of information with the view to prevent tax evasion. The present agreement is thus based on the most up-to-date global standards to curtail offshore tax evasion through the automatic exchange of tax information.