Saturday, July 13, 2013
Foreign banks on Friday won yet another delay in a sweeping Treasury Department law intended to end tax evasion by Americans and will now have until next July to begin complying with the requirements, the IRS said [Notice 2013-43].
The unusually broad law, the Foreign Account Tax Compliance Act, or FATCA, requires foreign financial institutions, including banks and mutual funds, to either collect and disclose data on American clients with accounts holding at least $50,000, or to withhold 30% of the dividend, interest and other payments due those clients and to send that money to the IRS.
The latest unexpected rollback of the deadline, an extension of six months to July 1, 2014, underscores a struggle by the Treasury Department to enforce the new rules. The law was approved in 2010 amid heightened scrutiny of offshore private banking services sold to wealthy Americans, and it was originally scheduled to go into effect last January. But in late 2012, facing heavy criticism, the government delayed its rollout until January 2014.
Foreign banks have argued that the regulation will cost too much to carry out and is too broad, particularly regarding cross-border payments on swaps and other derivatives. Many European financial trade groups have derided it as an imperialistic push by the United States to impose its own tax laws on the rest of the world. The United States taxes its citizens and residents on their worldwide income, regardless of where they live.
Kenneth Kies, a lobbyist in Washington, D.C., said that the extension “underscores what has been obvious — that this is an enormously complex and burdensome regime to deal with,” adding, “People just aren’t ready.” ...
James Hines, a corporate taxation professor at the University of Michigan, said some foreign governments were refusing to cooperate with the new rules. “It puts the Treasury in a tough position,” he said. “It’s not clear how many delays they can have before FATCA starts to get undermined.”
- Accounting Today: Treasury Delays FATCA Withholding Requirement
- Forbes: U.S. Inks FATCA Tax Deals With 9 Nations, Pursues 80 More During 6 Month Reprieve
- Reuters: U.S. Treasury Delays Offshore Tax-Dodge Law by 6 Months
- Wall Street Journal: U.S. Delays Rollout of Offshore Tax Dragnet Central Provisions of Law Will Now Take Effect in July 2014