The US Treasury is sending a top tax official on a mission to push home the message that the US is serious about enforcing the Foreign Account Tax Compliance Act (FATCA).
Deputy Assistant Secretary for International Tax Affairs, Manal Corwin, is globetrotting between europe and Asia to drum up support for FATCA and to urge countries that have not yet signed up to the tax pact to come in from the cold.
So far, the UK and US have signed a bilateral FATCA agreement that reduces the reporting requirements under the law for UK based financial institutions and also opens the way for the US to pass financial information about UK taxpayers with accounts in the States to HM Revenue & Customs.
Germany, France, Spain and Italy are expected to sign similar deals after agreeing in principle to the supporting FACTA. Other countries, like Australia and Japan are also ready to apply.
Next stop Singapore
So far, Corwin has met senior staff from the European Commission and government officials from all EU member states.
Corwin has also led a briefing session on FATCA and the model agreement for financial industry stakeholders, hosted by the Organisation for Economic Cooperation and Development (OECD).
“The secretary has had discussions with government officials from non-European financial centres who have expressed interest in further progress toward concluding FATCA agreements,” said a spokesman.
Corwin’s next stop is Singapore to meet with government officials and business leaders from across Asia to discuss FATCA implementation, and to engage with interested jurisdictions regarding the possibility of concluding intergovernmental agreements.
FATCA is due to start from January 2013 and obliges foreign financial institutions (FFI) to tell the US Internal Revenue Service (IRS) about accounts and assets held by US taxpayers.
FATCA complaints
Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on income sourced in the US.
For financial firms, FATCA means identifying clients who are US taxpayers and tracking their accounts and assets to make regular reports to the IRS. Many are complaining that the cost of introducing FATCA outweighs the tax benefits to the US.
Some FFIs are closing their doors to US taxpayers or asking clients to move their accounts elsewhere.
Many European FFI’s, especially those in Switzerland, suggest many clients are trying to move their assets to the Far East to avoid FATCA – especially Singapore, hence Corwin is keen to spell out to the government what flouting FACTA could mean to local FFIs.
