It would be interesting to see how much FATCA implementation has cost around the World.
Next week sees the publication by HM Treasury of legislation which has already cost the City of London hundreds of millions of pounds and is likely to see the UK financial services industry landed with a massive annual bill for years to come.
The draft legislation will detail how hundreds of UK financial firms from the biggest banks to the smallest broking houses will be expected to implement the United States’s Foreign Account Tax Compliance Act (Fatca).
This was brought in by the Obama government in response to the growing number of US citizens who were discovered trying to evade tax by holding bank and wealth accounts overseas. After several high-profile cases involving mainly Swiss banks the US authorities decided to shift the onus for discovering avoidance away from their own law enforcers and whistleblowers to the banks and firms which hold the accounts.
At the same time preparation for Fatca, which is likely to be enforceable from the start of 2015 but will require reporting on clients’ affairs in 2013 and 2014, has seen banks recruit hundreds of highly skilled tax, compliance and IT experts at huge cost.
Fatca will require banks, wealth managers and other account-running firms to report on any of their clients whom they believe to be US citizens with anything over $50,000 (£31,000) in their accounts.
It is a huge exercise for banks just getting ready for Fatca. It is not just that we will have to report annually from now on while taking even more care whom we allow to open accounts. The potential for cock-ups and errors is phenomenal. We don’t want to promote tax evasion but it does appear we are bearing a lot of the Americans’ costs for them.
One estimate says the cost worldwide is several billion dollars.
Nigel Green deVere Group blog