As financial institutions around the world gear up to implement America’s Foreign Account Tax Compliance Act (FATCA), one expert is warning that this is just the beginning of increasing legislation.
His concerns follow Britain’s launch of ‘son of FATCA’ – while Germany, France and Italy are all about to unveil their own laws based on FATCA legislation.
FATCA is proving to be controversial since it compels foreign financial institutions to reveal details of their US taxpaying clients to the authorities or face a hefty 30% withholding charge on all transactions between it and the US.
With a deadline for compliance set for January 2014, governments and financial institutions are scrambling to meet the law’s requirements.
Firms are restructuring their customer databases and tax authorities are signing up to intergovernmental agreements (IGAs) to ensure that compliance does not contravene their own country’s privacy and data protection laws.
US FATCA focus
However, one expert is highlighting the prospect that many other countries look like using the opportunity to introduce their own versions of FATCA.
Davide Ferrara, of consulting firm CSC, said: “From the meetings we have held so far, most financial institutions are still focused on the US version and are not considering the fact that other FATCAs looks like being implemented.
“By doing so I am worried, both as a bank customer and an industry participant that the banks are not going to be flexible enough about implementing future FATCA requirements.
“This means that the financial institutions will have to go through the whole process again and again rather than preparing to accommodate subsequent regulation, whether it is from the UK or otherwise, within their existing structure and processes.”
Impact on taxpayers
The UK has already unveiled its own version – dubbed ‘son of FATCA’ – to track down the British taxpayers who may be hiding their assets offshore.
The new law has already had an impact on British territories and dependencies which will have to comply and the Isle of Man is among the first to sign an agreement with the UK government.
The growing prospect of having to comply with foreign legislation and reveal details of their account holders has led to many big US banks to begin lobbying their representatives in Washington to prevent them having to do so.
One of the big issues about FATCA is the cost and the extra work that is going to be generated for compliance.
A financial institution will still have to prove that they do not have any US taxpayers as clients and if they do have them they will then have to undertake tax collection on behalf of the US.
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What a lot of folks seem to ignore, or don’t care, is the BIG question of the dublious legal basis for the FATCA IGAs that the US is forcing down the throats of various governments around the world.
They are mis-characterized as bi-lateral agreements, and sometimes called Treaties, but they are neither of those.
The US calls them either Executive Agreements (EA) or Competent Authority (CA) agreements to be sure they can avoid the ‘advise and consent’ process in the Senate. Of course, almost all other countries have to take these “agreements” (The UK calls the Treaties) to their Parliament for approval.
Why the difference views of these agreements. Does it matter? Are America and the UK separated by a common language?
For more discussion on the subject, this paper by Allison Christians should make you think, “What are they up too?”
Read more here…..https://bit.ly/WZKphF