The US Internal Revenue Service (IRS) has launched a data exchange service to enable foreign financial institutions that are following the US Foreign Account Tax Compliance Act (FATCA) share client data in encrypted format.
Over 145,000 financial institutions have registered through the IRS FATCA Registration System, with the US having more than 110 IGAs, either signed or agreed in substance.
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The financial institutions and national tax authorities will use the International Data Exchange Service (IDES) to issue information reports on financial accounts that are held by US taxpayers, the agency said.
IDES is a web application which will enable a sender to encrypt data, and will encrypt the transmission pathway to protect data transfers.
The service addresses security concerns of sensitive tax data through encryption at the file as well as the transmission level.
IRS Commissioner John Koskinen said, "The opening of the International Data Exchange Service is a milestone in the implementation of FATCA. With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system."
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By GlobalData
