Magazine article American Banker

Foreign Tax Act FATCA Comes into Focus

Magazine article American Banker

Foreign Tax Act FATCA Comes into Focus

Article excerpt

Byline: Daniel Wolfe

U.S. banks should take notice of the latest developments with the Foreign Account Tax Compliance Act, a tax-evasion law aimed primarily at foreign banks.

One of the more meaningful implications for U.S. financial institutions comes not from the 388-page guidance published last week but from a separate announcement about reciprocity with other governments.

FATCA is designed to increase tax revenue by making it harder for U.S. taxpayers to hide funds in offshore bank accounts. It will require non-U.S. banks to report any applicable funds to the Internal Revenue Service. Otherwise, U.S. banks will be required to withhold 30% of applicable funds before they are transferred to noncompliant banks.

Separately, the Treasury Department said it is working with the governments of France, Germany, Italy, Spain and the U.K. to ease the reporting requirements. The proposed approach would let banks in those countries report to their own governments on U.S. taxpayers rather than report to the IRS.

The risk for U.S. banks is that this could eventually become a two-way street.

"It really pushes the pressure that the reporting of bank deposit interest [for foreign clients] is going to have to happen now," says Dominick Dell'Imperio, a partner at PricewaterhouseCoopers LLP and co-lead of its global information reporting practice. "There's no way that the U.S. government can get other governments to say, 'Yes, we'll share the information with you,' when we keep saying we won't share it back. …

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