Forget Foreign Account Tax Compliance Act (FATCA) – GATCA is on the way and will be here sooner than most people think.
Dubbing their prediction the Global Account Tax Compliance Act (GATCA), financial experts believe the controversial US law will give way to an international tax information sharing model in just a few years.
Already, Britain has reined in former tax havens like The Cayman Islands, Jersey, Guernsey and the Isle of Man with a pact to disclose information about UK taxpayers sheltering their cash and assets offshore.
The European Union has hinted moves are afoot for an EU FACTA to include all 28 nations belonging to the union.
China has also announced a major shift in the government’s stance on tax by quietly introducing new laws demanding onshore residents declare their offshore bank accounts and investments.
“Governments have been moving towards GATCA for several years,” said Jim Calvin, a partner with accountants Deloitte in Singapore.
“Looking back, the signs were there. Only the United States could make FATCA work because it’s the only nation with a single, dominant capital market. However, other nations jumped on board so quickly with simultaneous announcements that they were signing agreements with the US that it was clear the States was not acting alone.”
FATCA is programmed to start from July 1 and requires foreign financial institutions to identify bank accounts and investments controlled by US taxpayers or trusts or companies they own that have a balance of more than $50,000 at the end of a tax year.
Financial institutions that register as FATCA compliant by April 25 will not face penalties for failing to file reports, but those that have not signed up and fail to deliver the reports could be fined and have funds in the US frozen.
Benefits of GATCA
“Many nations were suspicious of FATCA as it undermined their internal banking and privacy laws,” said Calvin.
“But over time, everyone has become used to the idea and sees the benefits of having a similar law to monitor the financial affairs of their own taxpayers sheltering money offshore.”
The Organisation for Economic Co-Operation and Development (OECD), an umbrella group for many of the world’s leading economies, has already published a report indicating how a GATCA tax law would work.
The intention seems for governments to work together and share tax information to stop the wealthy and rich companies from moving their money and assets between countries to manipulate the amount of tax they pay downwards.