Big steps toward curbing overseas tax evasion

For nations around the world, offshore tax evasion is a pressing concern. Every year, wealthy individuals evade millions of dollars in taxes, depriving governments of all sizes of much-needed resources to fund public services and investments. To the average citizen, it seems like some of the most affluent use overseas accounts to avoid paying taxes with relative impunity, contributing to the perception that the tax system is unfair. Governments across the globe are recognizing the growing support for tax fairness, and with the United States at the lead, the world community is making important progress to expose these hidden financial accounts and stop offshore tax evasion.

This past week saw important steps in the effort to combat offshore tax avoidance. As part of the United States' efforts to improve tax compliance, the U.S. Treasury and the Internal Revenue Service issued the last major set of guidance to implement the Foreign Account Tax Compliance Act (FATCA). Congress passed this law in 2010 in a bipartisan manner to create incentives for foreign financial institutions to identify accounts held by U.S. taxpayers and bring overseas assets to light.

(Watch: Credit Suisse accused of running tax-evasion effort)

This guidance clarifies various FATCA provisions and harmonizes the law with reporting and withholding tax rules already in place. As they have since the law was enacted, Treasury and the IRS sought to achieve a balance between detecting and deterring tax evasion and minimizing the compliance burden on financial institutions. These regulations ensure that FATCA is on track to launch on July 1, 2014.

Over the past few years, FATCA has become the global standard for fighting international tax evasion. The U.S. has partnered with like-minded governments to find efficient ways to implement the statutory reporting requirements. Progress has been substantial: The U.S. has signed intergovernmental agreements with 22 countries, and many more have either reached agreements in substance that are awaiting signature, or are well along in the process.

(Read more: Treasury signs anti-tax evasion pacts with six jurisdictions)

The success of FATCA and its cooperative approach form the basis for the second recent important development in the fight against offshore tax evasion – the adoption by the G-20 countries of a Common Reporting Standard developed by the Organisation for Economic Cooperation and Development. The Common Reporting Standard creates a global template for governmental information sharing on financial accounts. The U.S. has led the global charge in this area, as the Common Reporting Standard is modeled on the FATCA intergovernmental agreements. Moreover, the Common Reporting Standard builds directly on the information exchange infrastructure that FATCA requires.

This past weekend, adding further momentum to the battle against offshore tax evasion, the G-20 finance ministers formally endorsed the Common Reporting Standard and committed to working with all relevant parties to detail their implementation plan at their September meeting. Already, more than forty countries have committed to early adoption of this Standard, and now the largest economies of the world support this important initiative. In their endorsement, the ministers called for early adoption of the Common Reporting Standard by all jurisdictions that are able, and pledged to support low-income and developing countries so that they benefit from this important work on taxes.

(Read more: Hollywood wants everyone except them to pay their 'fair share')

The G-20 endorsement of the OECD Common Reporting Standard serves as a testament to FATCA's success in sparking a worldwide movement to effectively and efficiently combat tax evasion. With the global community coming together to support them, FATCA and the Common Reporting Standard are here to stay, making the world a less hospitable place for wealthy tax evaders and creating a fairer and more just tax system.

By Mark J. Mazur

Mark J. Mazur currently serves as the Assistant Secretary for Tax Policy at the U.S. Treasury Department. In this role, he is responsible for developing, analyzing, and coordinating Treasury's and the Administration's agenda, policies, and guidance on tax issues.