The US Foreign Account Tax Compliance Act (FATCA) has been delayed by another six months after the US Department of the Treasury and the Internal Revenue Service (IRS) agreed a six-month extension to the withholding and account due diligence requirements. The aim is to allow more time to complete agreements with foreign jurisdictions.
The extra six months compliance time, extending the FATCA deadline until 1 July 2014, will also mean foreign financial institutions (FFIs) get the time they need to comply with FATCA, which is essentially expanding the US’ time-evading powers around the world and has met some resistance from other nations.
According to Robert Stack, US Treasury deputy assistant secretary for international tax affairs, perhaps referencing international opposition, said: “Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding [enforcement] begins.”
“The high volume of international participation in this effort represents a quintessential race to the top,” he continued, somewhat optimistically. “Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”
Passed by the US Congress in 2010, the FATCA regulation targets non-compliance by US taxpayers using foreign accounts and seeks to establish a global approach to combatting offshore tax evasion – a key aim of the G20 in these austere times. FATCA requires US financial institutions (FIs) to withhold a portion of payments made to FFIs who do not agree to identify and report information on US account holders.
Commenting on the deadline extension, Jim Muir, director of data reconciliations specialist AutoRek said: “We have made comment in the past about regulators underestimating the impact of legislation on regulated entities. Often we bemoan the fact that this misjudgement causes huge planning disruption and much revenue for consultants but rarely has the desired impact of good legislation being implemented on time.
“It seems to me that the failure to understand the complexity of the changes that FATCA demands may be backfiring and will mean that the industry has less faith in meeting regulatory deadlines in the future.
“All that this ‘dis-connectivity’ serves to do is to create tensions between the regulator and those regulated [FFIs], damaging the perception of the financial services industry as a whole. To get the relationship between regulators, businesses, financial services and the public back on track, smaller, more manageable phases of change are the best way to get the desired results and encourage organisations to start taking compliance deadlines more seriously.”
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