Good news: FATCA delayed. Again.
The announcement that America’s Internal Revenue Service (IRS) is giving non-US financial institutions a further six months to comply with its controversial Foreign Account Tax Compliance Act (FATCA) programme is another sure sign that this flawed tax act is –thankfully – unravelling.
On Friday, the IRS confirmed that the deadline for the entire world’s financial institutions to become FATCA-compliant would move from 1st January to 1st July 2014.
This is the second time this deadline has been pushed back.
To my mind, this latest date change signals how the US Treasury is continuing to struggle to have all the world’s governments sign up to the intergovernmental agreement (IGA). The IGA would force those countries’ financial institutions to report their American clients’ financial activities directly to the IRS – or be hit with a 30 per cent withholding tax and be effectively blocked from doing any kind of financial transactions with the US.
There can be no other explanation for the new delay in implementing FATCA, other than that the US authorities are failing to convince governments across the world that they would benefit from this one-sided, expensive and burdensome project.
Many of the world’s governments are, it would appear, simply not prepared to cave into this form of American financial imperialism – why should they be cowed into imposing US tax laws in their nations? – and are not agreeing to the IGA. This is why the six month extension has been announced, I’d wager.
But what will happen if by 1st July 2014 the US still hasn’t convinced a significant amount of countries – especially the economically dominant ones, such as China and Russia to sign the FATCA IGA? Will FATCA – a much lauded Obama administration policy – be delayed again for another six months? Will it be rolled back indefinitely?
Surely, that would become more than a little embarrassing for the US government, wouldn’t it? Indeed, many would say, with it being rolled back twice already, it is already looking decidedly embarrassing. Perhaps it is time the White House repealed this highly damaging and ineffective piece of legislation once and for all? If not for the sound economic reasons, perhaps for the political ones?
Nigel Green deVere Group
Blog written 15th July