WASHINGTON – The U.S. Department of the Treasury and the Internal Revenue Service today announced that due to overwhelming interest from countries around the world, a six-month extension to the start of the Foreign Account Tax Compliance Act (FATCA) withholding and account due diligence requirements will be provided to allow more time to complete agreements with foreign jurisdictions.
The six-month extension, to July 1, 2014, will also provide foreign financial institutions (FFIs) with the time necessary to comply with FATCA while helping to ensure efficient implementation of the law.
“Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”
Enacted by Congress in 2010, FATCA targets non-compliance by U.S. taxpayers using foreign accounts and establishes a global approach to combatting offshore tax evasion. FATCA requires U.S. financial institutions to withhold a portion of payments made to FFIs who do not agree to identify and report information on U.S. account holders.
To make compliance with the reporting requirements of FATCA feasible, particularly for FFIs in jurisdictions where existing laws prohibit this type of reporting, Treasury has developed intergovernmental agreements (IGAs) that rely on governmental cooperation to facilitate the exchange of FATCA information. This approach not only addresses legal impediments that exist in some foreign countries, but also reduces burdens on financial institutions and streamlines the reporting process. The approach has been praised by the Organisation for Economic Co-Operation and Development (OECD), the G-8, and many others within the global community who are now actively considering making FATCA IGAs the basis for an international standard for the automatic exchange of this type of tax information.
Stopping offshore tax evasion is a global issue and the IGAs are a crucial component to FATCA implementation. To date, Treasury has signed nine IGAs, and is engaged in related conversations with more than 80 other jurisdictions.
While the start of withholding and due diligence will be extended to July 1, 2014, the first report of information under FATCA continues to be due in 2015, and will include information about accounts maintained during 2014. The FATCA registration website will be open by August 19, which will allow financial institutions substantial time to begin testing the process and entering information. Other key FATCA deadlines, including expected timelines for the implementation of withholding on gross proceeds from sales of U.S. securities and passthru payment withholding, remain unchanged.
Geoff Cook:
What is truly remarkable about this statement is that the delay is explained "Due to overwhelming interest abroad"
Jersey has a good relationship with the US Treasury and IRS and it is not my intention to do anything to disturb that, but even American citizens must see the irony in the US Treasury statement. The US is imposing extra territorial information exchange on the rest of the world, which means other countries are incurring significant costs through putting in place information capture and transfer systems.
Collectively across the world this is likely to run into billions of dollars in systems and implementation costs.
Just to be clear I have no issue with fighting tax evasion, cheating on taxes means the rest who are honest have to carry a heavier burden; fair taxes and a commitment to paying them are hallmarks of civilisation and a matter of civic duty.
But whenever spending taxpayers cash there has to be some eye to cost benefit. If you spend as much or more than you are getting back, it isn’t a wise use of resources. Where is the cost benefit analysis on US FATCA? I think the answer is one hasn’t been done or if it has it hasn’t been made public.
Other countries are bearing the weight of US tax administration with no clear idea at all as to the overall cost benefit other than they absorb the costs and the US gains the benefit. What is frustrating for other countries is that having got themselves and their institutions lined up to comply we are faced with a moving target with IT, legal, and regulatory resources put in place on the assumption that we are working to a given timetable, only to find that timetable has become a moving target
The ‘overwhelming international interest’ the US Treasury decribes has as it’s source the threat of a 30% with holding tax and it does the US Administration a disservice to suggest that countries are merrily skipping along, keen to take on this new and expensive reporting burden.
The reality is they have significantly underestimated the impact on the US IRS, its computer systems, its personnel and its administrative capability, and are not in a position to process FFI registration nor implement IGAs.
We too are comitted to fighting financial crime, we have signed up to US FATCA, UK FATCA, G5 Multilateral, and OECD Multilateral, but just as we reasonably expect taxpayer’s to be honest; friends joining hands to fight this problem should be honest with each other.
