Financial Institutions Brace Themselves as FATCA Prepares to Go Global
August 20, 2014
Just as financial institutions began getting a grip on the Foreign Account Tax Compliance Act (FATCA), the Organization for Economic Cooperation and Development threw a curveball by introducing the new global version. The OECD proposal is called the Global Standard for Automatic Exchange of Information and it will be the platform for a virtual highway where detailed account information will travel between governments.
FATCA, which took effect in July but won’t be rigorously enforced until 2016, has proven to be quite the administrative hurdle. FATCA’s goal is to limit the use of offshore tax shelters by requiring all foreign financial firms to report their holdings of U.S. citizens’ accounts to the IRS. While it might sound as simple as handing over a spreadsheet, the process is extremely complex.
While some multinational banks fall under intergovernmental reporting agreements, others fall directly under reporting structures with the IRS. Each comes with its own headache.
Even in the earliest stages, it is estimated that FATCA has cost Canada’s five largest banks approximately $700 million.
With more than 65 countries having publicly committed to FATCA’s implementation and 40 more expecting to commit by 2017, the administrative headaches are far from over. While the process will eventually be automated, it’s going to take years to get to that point and FATCA, GATCA and other acronyms are sure to keep banks and attorneys wrestling with compliance challenges long into the foreseeable future.
Source: Joe Hapaz, “FACTA Poised to Go Global,” Forbes, August 13th, 2014