How you will end up paying the price of America’s controversial new tax act
Clients of British and Irish banks could face increased banking costs after the UK and Irish governments have signed a controversial intergovernmental agreement (IGA) with the US to report directly to America’s Internal Revenue Service (IRS).
The UK and Ireland are amongst the countries which have already accepted an IGA with America in order to be compliant with the Obama administration’s Foreign Account Tax Compliance Act (FATCA). FATCA will require all foreign financial institutions to declare the activities of all their American clients to the IRS.
The costs of becoming FATCA-compliant for banks, and other financial institutions, in countries where an IGA has been agreed will be astronomical.
In these challenging economic times, when some banks have even had to be rescued from collapse using taxpayers’ money, financial institutions can ill-afford these costs and they will, of course, be passed on to their clients.
Essentially, banks, and in turn their clients, will be paying for the privilege of becoming defacto snooping agents for the US Treasury.”
Last year Shroders, the asset management company, estimated that it will cost $500bn to implement FATCA and a further $10bn annually to operate it. The cost to the UK’s financial services industry alone is believed to be £400m, and some reports put the cost for some Swiss banking groups at CHF 150m.
The enormous financial burden put on financial institutions and their clients the world over, in an attempt [by the US government] to recover less than $1bn per year in lost taxes, is wholly unacceptable and is one of the many reasons why FATCA must be repealed.
Foreign financial institutions have until 1st January 2014 to meet FATCA’s requirements.