The US financial industry is pleading with the government to put back the start date for the Foreign Account Tax Compliance Act (FATCA) to give them more time to meet the mammoth task of identifying millions of foreign account holders.
FATCA is due to start rolling out between January and July 2014 and is designed to net suspected US tax avoiders with secret offshore accounts and investments.
Foreign financial institutions must identify and report account information about US nationals or accounts controlled by US nationals with a balance of $50,000 or more – and failure to do so means a 30% withholding tax on all their financial transactions in the US.
An unforeseen consequence of many FATCA agreements with foreign states like Britain, France, Germany and Japan is the treaties also demand the same information about their nationals holding accounts and investments with American financial institutions.
Writing to the US Treasury and Internal Revenue Service, beleaguered financial institutions are begging for more time to comply as the two-way FATCA deals have caught them on the hop.
Deadline difficulties
A whole host of financial big guns has made the appeal, including the Securities Industry and Financial Markets Association, American Bankers Association, Clearing House Association and the Institute of International Bankers.
The letter argues July 1 does not give them enough time to implement FATCA and that a lack of final guidance and snail pace negotiations with many nations over how FATCA will work with them does not help their cause.
“Securities firms and banks are working hard to be ready for FATCA,” said a spokesman for the financial group. “But the lack of complete guidance is hindering planning.
“Preparing for FATCA means recruiting and training staff, setting up and testing systems and other time-consuming work. The IRS has left us with large gaps in guidance and a lot of questions that need to be answered for implementing FATCA.”
Costa Rica signs FATCA deal
The letter urges the Treasury and IRS to reconsider the start date of FATCA for six months until January 1, 2015 to avoid disruption and confusion.
Meanwhile, Costa Rica has become the latest nation to sign a FATCA agreement with the US that will start from March 31, 2015.
“This shows Costa Rica’s willingness to demonstrate transparent financial regulation and our wish to collaborate in the fight against tax evasion, money laundering, and legal loopholes,” said Edgar Ayales, Costa Rica’s finance minister.
Interestingly, the date the agreement is set to start is nine months past the official FATCA trigger date.
