U.S. financial institutions may see their reporting burdens rise as a result of a law designed to prevent taxpayers from hiding funds offshore.
The Obama administration is preparing to ask Congress for authority to demand more disclosure from U.S. banks to foreign governments about the American accounts of their citizens, Reuters reported on Tuesday.
The move arises from the administration's implementation of the Foreign Account Tax Compliance Act, which requires foreign banks to notify the Internal Revenue Service about accounts held by U.S. taxpayers. To force compliance, the law authorizes the U.S. to withhold 30% from proceeds on U.S. investments by banks in a non-compliant country.
The administration's anticipated request is said to be driven by promises being extracted by foreign governments, including China, Germany and France, which all say U.S. banks should have to reciprocate by handing over more information about their citizens in exchange for those countries doing the same, the news service reported.
A Treasury spokesman said in an email that the "U.S. is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperation to combat offshore tax evasion." The department declined to comment on proposals it may present to Congress.
Though the Treasury has forged bilateral agreements with some foreign governments and jurisdictions to implement the FATCA's reporting and withholding provisions, the law will take effect next January regardless of whether bilateral pacts, which aim to facilitate reporting, are in place.
This article originally appeared in American Banker.
3 Comments
Justme
You've forgotten that there isn't a country in the world that wants information on people who aren't residents - except US - so 3 doesn't matter.
Posted by: p33t | February 26, 2013 7:50 AM
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If you have read the FATCA IGAs, you will know that they currently only hold a promise of reciprocity with only marginal Non Resident Alien interest information being provide the other government who is being forced to sign the so called "bi-lateral" agreement.
In article 6, treasury promises to advocated for legislation to support more reciprocity, and I guess that is what they is...
Here is a link to the UK IGA.. http://bit.ly/VGMW1z
Just look at 2 (b) and notice all the areas where there is no reciprocity as compared to 2 (a) demands.
1. Nothing on Custodial Accounts: (read the definition on that one)
2. Nothing about Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value
3. There is nothing about a definition of a specified U.K. Person. Look at the the definition of Specified U.S. Person for how complex that can be and how it includes Americans living in the UK, but no data requirement on British citizens living in the US..
4. Nothing about Controlling Persons
5. Nothing about Entities whether they are Non UK or UK entities.
6. Nothing about account balances.
7. Nothing about Depository 'checking' Accounts which may not have interest.
The most egregious asymmetric nature of this reciprocity being the US requirement in item 3 above of reporting "specified US Person" vs UK requirement of reporting 'UK residents' only.
That alone is HUGE, and stems from the medieval idea of a citizen being the chattel of the master no matter where he lives. National borders and sovereignty have no significance to the Lord's relation to his serf. NO ONE practices Citizenship taxation like the US asserts its right to do, and that really makes this reciprocity totally unbalanced in and of itself.
So, even if the Obama administration gets some ability out of Congress to force U.S. banks to hand over more detailed information on foreign countries citizens, the practical matter is that due to the nature of Citizenship taxation, the requirements for information exchange will still be asymmetrical, unless the entire world decides it likes the idea of tax citizens no matter where they reside and decides to copy the U.S. model. Let's hope they are not that dumb.
Posted by: Just Me | February 6, 2013 11:48 AM
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This will mean higher costs for U.S. financial institutions and the probable loss of at least some foreign customers at a time when many U.S. financial institutions aren't in such robust condition. This mirrors the situation the United States has created for financial institutions holding accounts of U.S. or suspected U.S. persons outside its borders. Les Fant, Expatriation Copesthesia Consultants www.expatriationcopesthesia.com
Posted by: LesFant | February 6, 2013 9:25 AM
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