Costa Rica has been a refuge for wealthy Americans seeking to avoid the steep rates they face in the Untied States, but that’s about to change.
Starting in January the Central American country along with the Cayman Islands, another popular investing destination will be off limits.
The US Treasury Department announced new agreements last week, which are designed to enforce the FATCA (Foreign Account Tax Complaince Act) of 2010.
The US government is on a mission to collect as much revenue as possible and close all the loopholes that lead to tax evasion overseas.
Costa Rica and Cayman Islands are the latest countries to make agreements with the United States, who says it has made pacts with 12 nations and plans to pursue 16 others.
Not all agreements are the same, but in general, most stipulate that foreign financial institutions provide annual reports to the Internal Revenue Service on American citizens with more than $50,000 on account with the companies, CBS says.
The US tax revenue lost in countries like Costa Rica is estimated to be in the range of tens of billions of dollars to hundreds of billions.
The notoriety of the Cayman Islands as a tax haven for millionaires, who try to avoid the American tax rates took a front seat during Mitt Romney’s bid for the White House when he was required to release his tax information.
Romney’s 2010 income tax forms and an estimated 2011 form showed the use of the Caymans, Bermuda, and Switzerland as overseas destinations that appeared to help lower his tax rate on $13 million in income to 14.1 percent.
The Romney campaign vehemently denied that such was the intent and added he saw no tax savings at all.
The agreement with Costa Rica is reciprocal and allows the nation to keep tabs on its citizens’ investments in the United States.
This stipulation in the FATCA agreements with 11 other nations has upset some Banks, which were asked to send confidential information to foreign governments.
In a case that is still pending, the Texas Bankers Association and Florida Bankers Association sued to stop the IRS from forwarding the information.
But Costa Rica and the Caymans are not the only places in which people hide from their governments to avoid taxes.
An estimated $1.2 trillion is kept from being disclosed in the US, making it the fifth-most popular nation for hiding money, as reported by the Tax Justice Network.