According to the Wall Street Journal, last weekend the financial ministers of France and Germany announced plans to fight international tax evasion. French Finance Minister Pierre Moscovici said, “I’m favorable to the introduction of a European Foreign Account Tax Compliance Act (FATCA).”

A joint statement from EU finance ministers said Europe wants to create “a truly global system” to collect tax information. This comes after many European countries have already signed up for the U.S. FATCA agreement, which calls on foreign financial institutions to share tax information about their American customers with the IRS. A European FATCA may call on U.S. institutions to share tax information about their European customers.

British Chancellor George Osborne said Europe must create its own FATCA as there is strong consensus amongst the G8, which includes the U.S., that tax transparency is key to improving international economies.

Osborne said, “there is now real momentum building toward a step change in the international community’s approach to tackling offshore evasion which [we’re] fully committed to grasp and make a reality as soon as possible.”

Osborne said tax transparency will be a “key element” of the upcoming G8 Summit in Northern Ireland next month, of which President Obama will be in attendance.

Last month, the United Kingdom, France, Germany, Italy and Spain agreed to automatically share tax information among their tax authorities. Eleven other European nations also signaled interest in sharing data within Europe.

A global FATCA agreement will significantly increase the tax information administrative burden on all businesses with foreign dealings. The best way U.S. firms can prepare for future regulation is to become fully prepared for initial U.S. FATCA rollout in 2014. Being compliant with the IRS’ foreign initiative will help businesses understand any tax information regulations from Europe and beyond.

An IGA is essentially any agreement made between two or more governments, but when it comes to tax information, IGAs are most commonly associated with the exchange of information to ensure compliance. Countries with more lenient tax laws and regulations have long been used by individuals looking to avoid paying taxes. However, while offshore bank accounts have been around as long as people have been trying to avoid paying taxes, increased information sharing between countries through IGAs is making it more difficult for these havens to exist.

FATCA and the increase of IGAs
The latest offensive in the U.S. war on tax evasion is the Foreign Account Tax Compliance Act (FATCA), which is legislation that requires foreign financial institutions (FFIs) to disclose information regarding bank accounts held by U.S. citizens. While many individuals and countries have expressed displeasure with FATCA, the regulations have led to a rise in IGAs between the U.S. and other countries.

The U.S. has already signed IGAs with the United Kingdom, Denmark, Mexico, Ireland and Switzerland, with discussions and finalizations underway with many other countries.

Different types of IGAs
When it comes to the IGAs regarding FATCA, there are two main models.

The differences between Model 1 IGAs and Model 2 IGAs concern how information is relayed to the IRS. Under a Model 1 IGA, the foreign government is responsible for collecting data from its financial institutions and then reporting this information to the IRS. Under a Model II IGA, foreign financial institutions report directly to the IRS, foregoing involvement from the foreign country's government in the information gathering process.

The development of an IGA
While it may sound simple enough, the process of creating an IGA, especially when it comes to something like the sharing of information from a country's financial institutions, can be extremely complicated.

Once a foreign government decides to enter into an agreement with the U.S., there's a long list of factors they must take into account. In the case of FATCA, these include how the regulations affect the foreign country's current laws, the costs in both time and money such regulations will result in for financial institutions, whether the sharing of information will be reciprocal, how information will be documented, etc.

Essentially, signing an IGA with the U.S. regarding changes to tax compliance means a foreign government must fully analyze the processes and system changes that will be necessary for the regulations to be implemented, as well as how this may affect its citizens and financial institutions.

With this in mind, it's easy to understand why many countries are hesitant to immediately jump on board with FATCA implementation, as such a decision can result in a huge undertaking.

In the case of FATCA, the U.S. has provided finalized regulations which include a step-by-step process for identifying U.S. accounts, as well as information reporting and withholding by FFIs.

For foreign governments, it comes down to whether signing an IGA is more beneficial than not. Besides the monetary assessment a country faces by not complying with regulations like FATCA, the foreign government also runs the risk of displeasing the country proposing the IGA, as well as other countries that comply. In a global village, such an action can have far-reaching financial repercussions, especially if the country depends on others for financial investment.

"America's Tax Code today is complex, inefficient and acting as a brake on our economy," Baucus said. "Chairman Camp and I believe it is in need of a serious overhaul. Over the past two years we've held more than 50 hearings and heard from hundreds of experts on how to fix the tax code, to make it simpler and fairer for families and spark a more prosperous economy. Now it's time to hear from the most important stakeholders—the American people."

Baucus, a Democrat, and Camp, a Republican, are far from the only politicians reaching across the aisle to address changes to the U.S. Tax Code. Democratic President Barack Obama focused on tax reform during his most recent State of the Union address, while Orrin Hatch, the Republican Senator from Utah, has recently highlighted the need for tax reform.

While specific changes have yet to be put forward, most calls for change have mentioned limiting benefits to special interests and preventing those with high incomes from abusing loopholes to avoid paying taxes. It will also be interesting to see if changes to the U.S. Tax Code specifically address tax information reporting, as much of the tax gap, which is currently estimated at $450 billion of lost revenue each year, is often attributed to underreporting from businesses.

"My bill is drafted with the intention of removing only FATCA provisions that undermine Americans' constitutional privacy protections and add burdensome regulations with a negative economic impact on the United States," stated a letter Paul sent to his fellow senators. "Other provisions enacted at the same time, such as those pertaining to clarification of foreign trusts and treatment of dividends that do not have those negative impacts have been left alone. The intent of this bill is not to disrupt legitimate tax enforcement, only to repeal counterproductive and constitutionally suspect mandates."

Accounting Today reports that a companion version of Paul's bill, along with measures intended to block the Treasury Department form carrying out intergovernmental agreements (IGAs), will be introduced in the House shortly.

Senator Paul's efforts to resist FATCA implementation will likely not stop anytime soon, as he has already placed holds on legislation regarding IGAs with Switzerland, Luxembourg, Hungary and other countries, preventing the Senate from voting on them. In fact, Paul has placed holds on every tax treaty negotiated by the U.S. since being elected in 2010.

Anti-FATCA legislation supported by conservative groups
Despite groups like Global Financial Integrity (GFI) and the National Foreign Trade Council (NFTC) urging Paul to stop holding up FATCA implementation, the senator has backing from conservative groups regarding his new bill.

"Sen. Paul is offering real leadership, working to defend individual rights and promoting common sense tax policy," said Andrews Quinlan, president of the Center for Freedom & Prosperity. "FATCA has caused significant harm for many Americans. This legislation is a critical and necessary first step toward cleaning up a colossal mess."

Meanwhile, Grover Norquist, a prominent conservative figure and the president of Americans for Tax Reform, has said that FATCA should be repealed because it will drive away capital.

Agile development is based on the 12 basic principles that group of developers laid out in the Agile Manifesto. It isn’t a step-by-step methodology, but a set of tools and practices that empower development organizations to create a better product.

Limitations of Traditional

The first software engineers employed traditional methods of engineering. They thought it was possible design a blueprint that was exactly what the client would want and develop a working piece of software based on that specific set of requirements. But that was an illusion. Bugs would surface, customers would want new features and industry standards would change. By the time the product hit the market, it was obsolete. Any changes that had to be made would go back into the development process and the new release would take a year or more. Traditional methodologies came to mean missed deadlines, bloated budgets, poor quality and long release cycles.

Improving the “Final” Product

At the core of agile development is the understanding that change is inherent and inevitable in software creation. One of the major tenants of agile is to “deliver working software frequently.” It stresses quick iterations with a product the client can use and offer feedback on. The development team is then able to take this feedback and incorporate it into new software releases within weeks or months. It’s a constant cycle of development, feedback and improvement.

 Sustainable Process

Another aspect of agile development takes into consideration the human element. When older methods were carried over to software development, it was difficult to sustain from a talent perspective. Deadlines were missed, people were working 80 hours a week and the entire process was burning out the developers. Based on the core concept of working on short iterations called sprints, agile development teams  are capable of maintaining high levels of productivity in the long term by practicing the 12 principles day in and day out. The principle of sustainability is controversial, but key under the tenants of the Agile Manifesto in order to create teams that can maintain high productivity levels over indefinite periods of time.

Part of this sustainability is maximizing the amount of time an engineer actually spends on development. At the end of the day, every task completed under agile development must add value to the product. It also means keeping development teams to a particular size. Anything too large is inefficient, but it’s important to recognize that working as a team is paramount to developing anything meaningful. Teamwork is fundamental to creating synergy and maximizing collective creativity.

A Changing Industry

For Convey, agile development makes a lot of sense. There’s only one certainty in what we do, and that is change is our reality. Compliance is a moving target. The IRS, U.S. states, and all other tax jurisdictions we serve constantly pass new legislation, changing tax reporting requirements each tax year. There are also industry changes to consider. Increased security standards require us to develop and implement them quickly in order to stay competitive and customer service expectations constantly drive new features. Agile development is the best way for us to keep up with these changes quickly and efficiently.

The Challenge of Adoption

Despite all the obvious benefits of agile development, it can be a difficult decision for some organizations to embrace its principles. In particular for larger corporations that are used to having a great deal of control over operations from an executive level. With agile organizations much of that control is relinquished to enable quick decisions and development adjustments. A lot of trust is required for agile development to be successful. Everyone from the executive level to the managers to the development team must be aligned in order to succeed.

There also must be a great deal of open discussion surrounding the agile framework before deciding whether or not to implement it into your development structure. Though it’s becoming the accepted method for business applications, it may not always be the right fit depending on the nature of your product and organization. Because agile development serves as a framework rather than a strict methodology, it is also possible to incorporate techniques from other methodologies to come up with an overall approach that is a fit for your needs as an organization.

The bottom line is agile development has improved the way we design software and allows us to quickly get clients what they need, but it was a measured decision that required buy-in from everyone in the organization to truly bring success.

"We are coming off of one of the most challenging filing seasons I've witnessed in my many years as a tax professional," Gary said at the IRS Public Forum on the Real Time Tax System Initiative. 

Gary highlighted the complexity and instability of the U.S. Tax Code as part of the reason this year was so challenging. These remarks are hardly out of the ordinary, as members of Congress have taken issue with the Tax Code in recent months, with both Democratic Senator Max Baucus and Republican Senator Orrin Hatch calling attention to the need for tax reform.

However, it's doubtful that the IRS was unaware of how challenging this tax season has been, as the government organization has been dealing with a reduced budget and fewer employees.

"In addition to facing budget cuts and the potential retirement of many experienced employees, the work performed by IRS employees continually requires greater expertise as tax laws become more complex and far reaching,"  reads a report from the Treasury Inspector General for Tax Administration.

Tax deadlines spotlighted
Gary went on to say that real-time document matching is an impossibility under current regulations, as the IRS does not receive tax information quickly enough to perform matching during filing season.

"The question before us is how the Service will acquire the information return data in a timely fashion," Gary said. "Something will have to give. Either the filing deadline will need to shift later or the Service will have to require an aggressive due date for the information return data that will be matched."

If due dates for tax forms are changed, this could greatly impact the tax information reporting process. Depending on when due dates would be changed to, businesses may face a shorter period in which to supply recipients with the proper forms. However, it's important to keep in mind that the IRS has announced no plans to change tax form due dates. Such a proposal would likely be met with resistance from taxpayers of all types, because, as Gary points out, current deadlines are "deeply entrenched in the American psyche."

"…[T]he cuts will wipe $600 million from the IRS's budget this year, forcing the agency's nearly 100,000 employees to be furloughed without pay for up to seven days," writes Blake Ellis for the news source. "The furlough days will begin May 24 and will be spread out among separate pay periods."

In addition to harming IRS employees, the NTEU makes the case that shutting down the IRS will do nothing to help the deficit, as 93 percent of the revenue used to fund the federal government is brought in by the agency, with every $1 invested in the IRS resulting in a $7 return from collections, the source reports.

While many government-funded agencies are experiencing challenges due to the sequester, budget cuts are likely hitting the IRS even harder, as the agency was already struggling, according to a report from the Treasury Inspector General for Tax Administration (TIGTA).

Not only does the TIGTA report show that the IRS's budget has been decreased for two consecutive years, but the government agency also had 5,000 fewer employees this tax season when compared to the previous year.

Troubles for the IRS aren't likely to go away anytime soon, as the report also highlighted the fact that nearly 39 percent of all agency executives and 20 percent of all agency managers are currently eligible for retirement, a discouraging fact for an understaffed agency dealing with increasingly more complex tax information. Furthermore, the report forecasts those figures to rise to 70 percent and 50 percent, respectively over the next five years.

The regulations, which concern updating application information, are not expected to result in excessive consumption of time or money, according to the IRS.

"The current Form SS-4, Application for Employer Identification Number, requires entities to disclose the name of the EIN applicant's 'responsible party' and the responsible party's Social Security Number, Individual Taxpayer Identification Number (TIN), or EIN," the final regulations state. "Employers are required to know the identity of their responsible party. The amount of time necessary to submit the updated information required in these regulations, therefore, should be minimal for these entities."

Despite these assurances, the IRS received three comments regarding the proposed regulations, two of which objected to them on the basis of increased burdens for entities, saying that the government agency was underestimating how much time it will take entity to comply. A third commenter objected on the grounds of monetary burden, saying that the related costs could reach over $100 million.

While the IRS said it considered these objections, the final regulations were ultimately adopted without change.

The new regulations are partly attributed to EIN applicants listing nominees, those individuals who were temporarily authorized to act on behalf of EIN applicants, as principal officers, general partners, grantors, owners and trustors. Not only will the new regulations make it easier for the IRS to determine the true responsible parties for EIN applicants, it will also help the government agency cut down on tax abuse through the use of nominees, which can help the actual responsible parties hide assets and income, according to the regulations.

As any organization required to comply with tax information reporting needs an EIN, these regulations will have a far-reaching effect.

The rules of the Senate allow its members to place holds on legislation, preventing them from being voted on, something Paul has done to every tax treaty negotiated since he was elected in 2010.

"The increased bilateral exchange of taxpayer information that these FATCA agreements create are crucial to cleaning up the worldwide shadow financial system, starting right here at home," said Heather Lowe, legal counsel and director of government affairs at GFI. "The U.S. should not be a safe haven for the dirty money of foreign tax evaders, just as foreign financial institutions should not harbor the illicit assets of U.S. tax evaders."

Despite the U.S. signing an intergovernmental agreement (IGA) with Switzerland regarding FATCA implementation in February, things cannot move forward until the Senate approves the treaty.

"…[T]ax haven secrecy costs American taxpayers $150 billion per year, just as government budget cuts are rippling through the American economy," Lowe said. "The implementation of FATCA and the automatic exchange of tax information will go a long way toward curtailing tax evasion in the U.S. and in Europe."

According to The Hill, a Senate aide was quoted as saying that Paul had issues with how FATCA would affect financial privacy, allowing the government to obtain sensitive financial information without evidence of wrongdoing.

Observers fearful of treaty hold consequences
Along with Lowe, Cathy Schultz, vice president for tax policy at  the National Foreign Trade Council, told The Hill that Paul's actions may cause other countries to avoid signing tax treaties with the U.S.

"This is eroding our credibility around the world," Schultz said.

Schultz also went on to express disappointment with Paul's unwillingness to discuss the matter.

"They're not looking for ways to resolve the issue," Schultz told The Hill. "They're not coming back to anybody and saying, 'how do we work this out?' It's not like treaties have never had holds on them. That part isn't new. The new part is the unwillingness to meet with business, and discuss these issues."

Paul is far from the only American who has criticized FATCA for both privacy issues and it's potential impact on foreign investment. Additionally, several countries have shown resistance to implementation of the regulations, making it unlikely that FATCA's troubles will be ending anytime soon.

"This is part of a wider effort by the IRS and other tax administrations to pursue international tax evasion," said IRS Acting Commissioner Steven Miller. "Our cooperative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes."

The three nations' tax administrations, which include the IRS, Australian Tax Office and HM Revenue & Customs, have each obtained data regarding the use of trusts and companies in areas like Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands. The information also concerns the owners of these entities, as well as those individuals who have advised and assisted in creating them.

While the IRS points out that there is nothing illegal with holding financial assets in offshore trusts and companies, these arrangements are often used to avoid paying taxes. The government agency is calling on all U.S. taxpayers who have assets in offshore entities to analyze and understand their tax obligations. The IRS is also encouraging these individuals to participate in its Offshore Voluntary Disclosure Program (OVDP).

Intergovernmental cooperation becoming the norm
The announcement from the U.S., U.K. and Australia regarding their plan to share data is only the latest example of foreign governments working together to combat tax evasion. The U.S.' Foreign Account Tax Compliance Act (FATCA) has resulted in a number of intergovernmental agreements (IGAs) being signed regarding the sharing of financial information. In fact, the U.K. has even gone so far as to create a similar program of its own, dubbed "Son of FATCA."

Interestingly, two of the latest governments to get on board with the U.S. regarding FATCA were specifically mentioned by the IRS in its partnership announcement. Both the British Virgin Islands and Cayman Islands recently announced that they will be signing a Model 1 IGA with the U.S.

Gonzalo Jalles, CEO of Cayman Finance, took issue with the Cayman Islands' reputation as a tax haven.

"Our financial industry provides a tax-efficient structure for transactions," Jalles told The Cayman Islands Journal. "Tax-efficient is not a fancy word for tax evasion, but means each investor or investment pays the appropriate taxes in the place where the investor is based or the investment is made without creating a second layer of taxes."

With countries that refuse to comply with FATCA facing a 30 percent withholding tax, it's no surprise that more are signing IGAs with the U.S. However, it will be interesting to see how countries that have long been suspected of acting as tax havens respond to the FATCA regulations, especially in the face of further efforts from countries like the U.S., U.K. and Australia to curb offshore tax evasion.