Countries around the world are rushing to beat the deadline for implementing the controversial Foreign Account Tax Compliance Act (FATCA).
The latest country to ink a deal with the US is Norway, but unlike many of the other countries who have signed up, the Scandinavian negotiators have managed to chisel a new deal.
The Norwegians have insisted on a caveat that will become more important to increasing numbers of countries, including those who have already signed, about the exchange of information.
While FATCA is aimed at unearthing US taxpayers who are holding more than $50,000 in assets in foreign accounts, Norway is insisting that it will not hand over any information until the American tax authorities do so first.
FATCA is controversial on a number of levels with many countries having to sign up to governmental agreements (IGAs) to protect their financial institutions from domestic laws such as data protection and privacy.
Fair exchange treaty
The impetus is on those financial institutions to comply and register with America’s Internal Revenue Service or face a 30% charge on all transactions between them and the US.
However, many critics of the law point out that the information exchange only goes in one direction.
Now the Norwegians have managed to tie the US to a fair exchange deal it is likely to cause problems within the US since many banks have already petitioned Congress to be excluded from any IGAs which compel them to handover information to a foreign government.
There are two types of IGAs on the negotiating table and one does not compel the US to exchange financial and tax information with signatory countries – and this is the deal signed by the UK, Ireland, Denmark and Mexico.
A second version does allow for the exchange and this has been signed by Switzerland.
India to rubberstamp FATCA
The new version negotiated by Norway has a timing restriction which puts no obligation on them to exchange any information until the US is ready and willing to do the same with them first.
Lots of other countries are currently negotiation and some are said to be close to signing while others, including Germany, have agreed to sign but are delaying doing so.
Critics of the law, which is aimed at curbing the secrecy of offshore financial centres, say that many countries will not enact FATCA to undermine the agreements already signed.
Now, India looks to be the latest country to sign an agreement that will reveal the assets and accounts held in financial institutions by US companies and citizens.
Indian media reports that its financial services regulator Sebi is currently looking at the finer details of the agreement and an announcement is expected soon.