The Internal Revenue Service (IRS). Photo via Business Insider

The Argentine national tax collecting agency (AFIP) has requested a meeting with the US’s Internal Revenue Service (IRS) in order to continue negotiations on implementing a Foreign Account Tax Compliance Act (FATCA). In plain English, that means that the tax authorities of the US and Argentina are trying to reach an agreement on sharing information in order to catch people for tax evasion in both countries.

A possible FATCA agreement would be part of the government’s overall objective to be fiscally transparent. It is in the process of getting a tax amnesty law passed in Congress (the bill is pending a Senate vote). The tax amnesty is designed to get the Argentine economy back on its feet in the most transparent way possible and would do so by allowing Argentines to declare previously undeclared assets without being asked where they came from. Basically, with this tax amnesty, people will pay a small fee (either penalties or interest) for the government’s forgiveness regarding prior non-compliance.

So what is the point of FATCA? Basically, if John Doe in the US has a bank account in Argentina, a new FATCA agreement between the two countries would imply that Argentine banks would tell the US if John’s assets are higher than a certain amount and thus eligible to pay taxes to the US. The same goes for Juan Fulano in Argentina with a US bank account. Each individual bank or financial entity has to sign agreements with the IRS (it’s not a question of Argentina and the US just signing a bilateral treaty). It’s kind of the US version of Argentina’s new tax amnesty, although this one was approved in 2010 and came into force in 2014.

This affects both Argentines that have US bank accounts and US citizens living in Argentina as the IRS will have account numbers, names and addresses of the account holder. However, because banks are bound by the secrecy between their clients and the institution according to Argentine legislation, FATCA is impossible to pull off unless an agreement is signed between the IRS and AFIP.

Most Argentine banks that operate in the US are already registered under the FATCA scheme since it was enforced in the US because those non-US financial institutions that do not comply are charged a 30 percent penalty on all transfers from the US. As mentioned in the video above, that means that of a “regular transfer from your great-aunt in California,” only 70 percent would be credited. Since this harms non-US bank clients as well as US clients, a lot of banks and financial institutions have already adhered to FATCA.

So basically the big advancement implied by these meetings would be Argentina obtaining information on Argentine citizens with undeclared assets in the US. Now that bilateral relations have been improving, it is allegedly becoming easier to open negotiations on the subject according to La Nación sources.

“A FATCA agreement would be useful for both the Argentina tax authorities and the US ones, who will want to show [off] Argentina as an example to the rest of the region,” said lawyer Gonzalo Fraga in an interview with La Nación.

Argentina has also signed  the Convention on Mutual Administrative Assistance in Tax Matters in the Organization for Economic Co-operation and Development (OECD), by which 100 countries, including Argentina, share information and cooperate in order to prevent tax evasion. Finance Minister Alfonso Prat-Gay has said that once the countries involved began publishing their fiscal information, Argentines would have “nowhere to hide” their undeclared assets.