Newspaper article International Herald Tribune

Foreign Banks Feel Vexed by U.S. Tax Evasion Law ; Costs and Effort Needed for Global Compliance Are among Top Concerns

Newspaper article International Herald Tribune

Foreign Banks Feel Vexed by U.S. Tax Evasion Law ; Costs and Effort Needed for Global Compliance Are among Top Concerns

Article excerpt

Even the critics acknowledge that they cannot stop the law from going into effect. The question is whether all the global financial institutions will comply equally.

A sweeping new U.S. law has a seemingly simple goal -- curbing offshore tax evasion by Americans who use foreign banks, trusts and shell companies. But behind the scenes, foreign banks and financial firms are increasingly finding that complying with the law is a major headache.

Officials at the U.S. Treasury Department say they are moving apace in getting the world's banks on board with the law, the Foreign Account Tax Compliance Act. They say they have reached agreements with some large countries, are working on deals with others and are refining parts of the law, which is set to take effect on June 30, 2014.

But some financial institutions, trade groups, scholars and members of Congress have raised an array of concerns, starting with the cost of creating the complex computer systems needed to track Americans' accounts.

In addition, tax havens like China, Panama and Russia have yet to sign on. And American banks are unhappy about a Treasury Department pledge to foreign banks, not part of the original law, to require American financial institutions to share data with other countries about foreign investors who have accounts in the United States.

"You can search a long time for comments from the private sector or other governments singing the praises" of the law, said Mark E. Matthews, a tax lawyer at Caplin & Drysdale in Washington, and a former deputy commissioner of the Internal Revenue Service, the American tax agency. "It's all criticism, and that speaks volumes about the challenges."

Still, even the critics acknowledge that they cannot stop the law, which was designed to become a model for global finance rules, from going into effect. The question is whether all the global financial institutions will comply equally.

The law, known informally as Fatca, effectively makes all foreign banks and foreign financial institutions arms of the I. …

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