Skip to content
International Adviser
  • Contact
  • Login
  • Subscribe
  • Regions
    • United Kingdom
    • Middle East
    • Europe
    • Asia
    • Africa
    • North America
    • Latin America
  • Industry
    • Tax & Regulation
    • Products
    • Life
    • Health & Protection
    • People Moves
    • Companies
    • Offshore Bonds
    • Retirement
    • Technology
    • Platforms
  • Investment
    • Equities
    • Fixed Income
    • Alternatives
    • Multi Asset
    • Property
    • Macro Views
    • Structured Products
    • Emerging Markets
    • Commodities
  • M&A Deals
  • Best Practice
    • Best Practice News
    • Best Practice Awards
  • Media
    • Video
    • Square Mile Research
  • My IA
    • Events
    • Directory
    • IA Tax Panel
    • IA Intermediary Panel
    • About IA

ANNOUNCEMENT: Read more financial articles on our partner site, click here to read more.

SIGN IN INTERNATIONAL ADVISER

Access full content on the International Adviser site, access your saved articles, control email preferences and amend your account details

[login-with-ajax]
Not Registered?

Other FATCAs likely, PwC expert says

By International Adviser, 15 Sep 11

A PwC expert has warned that initiatives similar to FATCA may be adopted by other countries.

A PwC expert has warned that initiatives similar to FATCA may be adopted by other countries.

Debbie Payne, a director of tax at PwC in London and an expert on the so-called Foreign Account Tax Compliance Act – signed into law by President Obama last year – told an audience of private equity industry officials that there was “a distinct possibility” that certain European countries may decide to “break away” from the rest of the pack “and bring in their own domestic, FATCA-like regimes”.

In the post-financial crisis world, where stricter controls have become the new norm, some EU countries are losing patience with the pace of pan-European efforts to develop a system for preventing systemic personal tax evasion by their citizens, Payne explained.

“So when you’re thinking about FATCA, yes it’s [a] US [programme], but don’t just think US, because I don’t think it’s going to be too long before this goes much broader.”

For this reason, she added, “I would say that when you’re collecting data, if you’re asking an investor, ‘Are you a US national, are you a US taxpayer’…think a little more broadly” – meaning, she later explained, that foreign financial institutions  consider taking the opportunity to ask their clients about other jurisdictions in which they may have tax obligations.

EU Savings Directive divide

At issue, as Payne sees it, is some division at the moment in Europe over the updating of the EU Savings Directive, which some see as a way to implement a FATCA-like regime in Europe – and support – while others do not.

The EU Savings Directive took effect in July 2005, and was designed to flush out tax evaders and make them pay tax in their home country on earnings from savings held in third countries. Many member states are understood to be disappointed by how little revenue this is generating, compared with what they believe they should be getting, but revising the directive in a way that pleases everyone is proving difficult.

If this revision takes too long, “given that they [the EU countries] are all looking at tax evasion, I would be very surprised if at some point, one of them doesn’t break ranks and implement a FATCA-like regime of some form,” Payne said.

Payne, who made her comments during a seminar on FATCA and the Alternative Investment Fund Managers Directive sponsored by Guernsey-based private equity specialists Ipes, also stressed that foreign financial institutions would be well advised to give up any thoughts they might have that the US will ever consider making major changes to FATCA, let alone repeal it. This is because FATCA is the US’s response to tax evasion by its own citizens, and not some aberration of the current US political climate, Payne said.

“There is amazement coming out of some of the institutions in the States as to why this has become such a big issue” in Europe, she added, noting that the genesis for FATCA came out of meetings held by the G7 and G8 countries following the financial crisis, and the OECD’s Tax Reporting and Compliance Enhancement Project, at which there had been common agreement of a need to crack down on tax evasion and the lack of information-sharing among jurisdictions.
 
“Because this came out of the OECD, the US cannot understand why Europe has such an issue with this, and is pushing back so hard.

“They’re saying, ‘you were sitting in the same meetings as we were with the OECD, and you didn’t say [at that time that] you couldn’t or didn’t want to comply with this; so  why are you getting so concerned when [all we are doing is going first?’

“As far as the US is concerned, they are collecting somewhere around 90 to 95% of the tax that is due to them from US citizens living in the US who have US employment income [and/or] or income from onshore investment accounts.

“As soon as those investment accounts move offshore, the collection rate goes down [significantly], to somewhere between 40% and 50%, depending on which figures you take.

“From a US perspective, that is tax evasion… and all the US wants to do is collect the tax which is due to it.”

This is why, she added, that “some of the representations that have been going into Washington have actually had less success than people in Europe might have thought” they would, as the US bases its rules on the tax definition of a US person rather than the current regulatory definition.

At least there is some good news having to do with FATCA, Payne noted: The compliance deadline has been pushed back by six months to 1 July 2013.

However, this was not due to pressure from foreign financial institutions so much as the American authorities’ own logistical problems in preparing to handle FATCA registration applications, although they do understand that “it was also going to be a physical impossibility for the large banks and asset managers to get their systems changed” in time to meet a 1 Jan 2013 reporting deadline, given the delays there have been in publishing the draft regulations.

Tags: FATCA | PWC

Share this article
Follow by Email
Facebook
fb-share-icon
X (Twitter)
Post on X
LinkedIn
Share

Related Stories

  • Latest news

    II Connect 2025: Highlights

    Equities

    Washington’s risky fiscal bet

  • Tax & Regulation

    QB Partners’ Gerry Brown sheds light on reservation of benefit case

    Tax & Regulation

    Just one week to go before II Connect 2025


NEWSLETTER

Sign Up for International
Adviser Daily Newsletter

subscribe

  • View site map
  • Privacy Policy
  • Terms and Conditions
  • Contact

Published by Money Map Media – part of G&M Media Ltd Copyright (c) 2024.

International Adviser covers the global intermediary market that uses cross-border insurance, investments, banking and pension products on behalf of their high-net-worth clients. No news, articles or content may be reproduced in part or in full without express permission of International Adviser.