The Vatican formally committed Wednesday to share the tax information of U.S. citizens with the United States in the latest move to improve the reputation of its scandal-marred bank and crack down on tax cheats.
Vatican and U.S. officials signed an agreement in which the Holy See committed to comply with a 2010 U.S. law designed to encourage — some say force — foreign financial institutions to share information about U.S. account holders with U.S. tax authorities.
For the Vatican, the agreement is to some degree symbolic since only about 1 percent of the 15,181 account-holders at the Vatican bank are U.S. citizens — or about 150 people.
But the Vatican foreign minister, Monsignor Paul Gallagher, said the Vatican's decision to sign its first intergovernmental agreement with the U.S. was part of its "long-term strategy to ensure and promote legality, transparency and ethical behavior in the economic and financial fields."
The Institute for Religious Works, as the bank is known, has long been accused by Italian authorities as being an offshore tax haven. Under then-Pope Benedict XVI, the Vatican began reforming its financial institutions to comply with international standards to fight money laundering and tax evasion.
So far, some 62 countries have signed these Foreign Account Tax Compliance Act agreements with the U.S., while 50 others have "agreements in substance." The Holy See recently signed a tax information-sharing agreement with Italy, though that is based upon request whereas the FATCA reporting is automatic and annual, U.S. officials said.
U.S. Ambassador Kenneth Hackett welcomed the signing, saying "Of all the measures that could be taken to eliminate world poverty, stopping tax evasion may be one of the most effective options."
Under the U.S. law, foreign banks that don't agree to share information face steep penalties when doing business in the U.S. The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program — a significant price for access to the world's largest economy.
That threat was not a deciding factor for the Vatican, which maintains most of its investments in European markets. However, the Vatican's decision to participate in the FATCA program was more a sign of its commitment to international fiscal cooperation.
Source: http://www.sfgate.com/
