Many Challenges Remain Under FATCA Rules, Foreign Banking Groups Say
Publication Date: 05/01/2012
Proposed rules on the Foreign Account Tax Compliance Act (FATCA) do not fully address operational and systematic challenges presented by the new law or fully look into alternatives, two international banking groups told the government April 30.
The letter is one of many pouring in on the proposed rules, which implement a law requiring foreign banks to disclose U.S.-owned accounts to the U.S. Internal Revenue Service or face, in some cases, a 30 percent withholding tax.
The Institute of International Bankers and the European Banking Federation said if these concerns remain unaddressed, they will threaten the ability of banks to participate in the system despite their best intentions to do so.
IRS unveiled nearly 400 pages of proposed rules (REG-121647-10) on FATCA in early February. At the same time, the United States and five other countries, including France, Germany, Italy, Spain, and the United Kingdom, announced intentions to enter into government-to-government information sharing agreements under FATCA.
Better Coordination Needed, Groups Say
The two international groups acknowledged in the April 30 letter that the proposed rules seek to better coordinate FATCA with existing know-your-customer and anti-money-laundering procedures. However, they said, “It is critical that a higher level of coordination be achieved to eliminate unnecessary burdens and costs.”
In addition, the groups said, the 2013 effective date for new account documentation is “a serious problem that requires immediate attention by Treasury and IRS.”
Another serious concern, the letter said, is “overly limited transitional relief” for FFI operations in jurisdictions in which FATCA conflicts with local law requirements.
In a fourth major point, the two international groups said the intergovernmental agreements currently under way between the United States and other countries should be uniform with each other and consistent with regulations to the greatest extent possible.
Banks and their affiliates should not have to apply different rules and systems to implement FATCA in the various countries in which they operate, the letter said.
The complete text of this article can be found in the BNA Daily Tax Report, May 1, 2012. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2012, The Bureau of National Affairs, Inc.