The looming Fatca tax evasion law sends global financial institutions running for cover with its ‘draconian’ range of rules and penalties
Bloomberg 14 May 2012
Go away American millionaires, is the message some of the world’s largest wealth-management firms are sending as Washington prepares to impose the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion,
HSBC, Deutsche Bank, Bank of Singapore and DBS Group all say they have turned away business.
“I don’t open US accounts, period,” Tan Su Shan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender, said, describing attitudes toward United States clients as draconian.
The 2010 law, to be phased in from January 1 next year, requires financial institutions based outside the US to obtain and report information about income and interest payments accrued to the accounts of Americans. It means additional compliance costs for banks and fewer investment options for US citizens living abroad.
“In the long run, if Americans have less opportunities to invest overseas, it would be a disadvantage,” Marc Faber, a fund manager and publisher of the Gloom, Boom and Doom report, said last month.
“Most of the hedge funds I know in Asia won’t take American clients.”
The almost 400 pages of proposed rules issued by the US Internal Revenue Service create “unnecessary burdens and costs,” the Institute of International Bankers and the European Banking Federation said in an April 30 letter to the IRS, one of more than 200 submitted to the agency. The IRS will hold a hearing tomorrow and could amend implementation of the rules, but can’t rescind the law.
The government needed to be tougher on offshore tax crimes, according to Democrat congressman Richard Neal, an original sponsor of the legislation.
Fatca, introduced after UBS admitted in 2009 that it aided tax evasion by Americans and agreed to pay US$780 million to avoid prosecution, was already helping to improve banking transparency, he said.
UBS said in 2008 it would discontinue offshore accounts for US citizens. The firm now referred them to its wealth-management offices in the US, or to its Swiss financial advisers unit, which complied with US and Swiss regulations, Serge Steiner, a spokesman for UBS, said.
Bank of Singapore, the private-banking arm of Oversea-Chinese Banking has turned away millions of dollars from Americans because it did not want to deal with the regulatory hassle, according to chief executive Renato de Guzman.
“It’s too complex, too challenging,” de Guzman, said. “You probably should have a dedicated team to handle them or to understand what can be done or what cannot be done. We have enough business in Asia, so we don’t want to make our lives too difficult.”
Asia has the world’s fastest-growing number of people with more than US$1 million in investable assets, according to a report last year by Bank of America and Capgemini. Its millionaires’ list climbed 9.7 per cent in 2010 to 3.3 million people, higher than the 8.6 per cent growth in North America. The combined wealth of Asian millionaires increased to US$10.8 trillion, topping Europe for the first time, the report said.
HSBC decided last July that it would no longer offer wealth-management services to Americans from outside their home country after authorities began investigating the London-based bank’s US clients.
Americans would be “better served” by private bankers in the US, Goh Kong Aik, a spokesman for HSBC in Singapore, said. He declined to say whether those who already had accounts abroad would be allowed to remain customers, except that they would be helped through an undefined “transition process”.
Deutsche Bank said it terminated accounts held abroad by people with US residency last year. The action did not include cheque or savings accounts and did not affect citizens living outside the US. The Frankfurt-based bank said “only a small number of customers” were affected.
Spokesmen for Credit Suisse, France’s BNP Paribas and Amsterdam-based ABN Amro, also among the top 10 non-US global wealth managers, said their banks had not yet decided what to do with American accounts.
“Bank accounts, investment accounts, mortgages and insurance policies are being refused to American clients, and those with accounts are seeing them closed or have been threatened with closure,” Marylouise Serrato, executive director of American Citizens Abroad, a Geneva-based organisation, said.
US citizens living in countries not served by US banks may find themselves unable to bank at all, and the law in its current form could damage US businesses abroad, she said.
“Americans either will not be allowed to enter into international partnerships or live and work overseas, and will be replaced by foreign nationals who do not have these limitations,” Serrato said. “The extensive reporting requirements of Fatca will be destructive to those who wish to do business internationally as well as to those Americans who are legitimately living and working overseas.”
Financial institutions that chose not to accept American customers still must determine whether new or existing clients were “US persons” in order to comply with Fatca, according to Michael Brevetta, director of US tax consulting at PricewaterhouseCoopers in Singapore.
The definition included citizens, green-card holders and non-Americans deemed US residents by being in the country for at least 183 days over a three-year period, which made them subject to US tax on worldwide income, according to the IRS.
Penalties for not complying will be stiff. Non-US firms that do not make required disclosures will be subject to 30 per cent withholding of certain dividends, interest or proceeds from the sale of assets they or their customers received from US sources, according to Richard Weisman, Hong Kong-based head of law firm Baker & McKenzie’s global tax practice.
“Overwhelmingly, financial institutions outside the US don’t like it, for obvious reasons.”
He said the withholding tax was a “stick” the US was wielding. “The US is outsourcing a tax-compliance function, which is enormously expensive.”
Renouncing citizenship was an option chosen by some Americans, with a record 1,780 giving up their passports last year compared with 235 in 2008, the IRS reported.
2 comments:
Wealthy Americans get the cold shoulder
The looming Fatca tax evasion law sends global financial institutions running for cover with its ‘draconian’ range of rules and penalties
Bloomberg
14 May 2012
Go away American millionaires, is the message some of the world’s largest wealth-management firms are sending as Washington prepares to impose the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion,
HSBC, Deutsche Bank, Bank of Singapore and DBS Group all say they have turned away business.
“I don’t open US accounts, period,” Tan Su Shan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender, said, describing attitudes toward United States clients as draconian.
The 2010 law, to be phased in from January 1 next year, requires financial institutions based outside the US to obtain and report information about income and interest payments accrued to the accounts of Americans. It means additional compliance costs for banks and fewer investment options for US citizens living abroad.
“In the long run, if Americans have less opportunities to invest overseas, it would be a disadvantage,” Marc Faber, a fund manager and publisher of the Gloom, Boom and Doom report, said last month.
“Most of the hedge funds I know in Asia won’t take American clients.”
The almost 400 pages of proposed rules issued by the US Internal Revenue Service create “unnecessary burdens and costs,” the Institute of International Bankers and the European Banking Federation said in an April 30 letter to the IRS, one of more than 200 submitted to the agency. The IRS will hold a hearing tomorrow and could amend implementation of the rules, but can’t rescind the law.
The government needed to be tougher on offshore tax crimes, according to Democrat congressman Richard Neal, an original sponsor of the legislation.
Fatca, introduced after UBS admitted in 2009 that it aided tax evasion by Americans and agreed to pay US$780 million to avoid prosecution, was already helping to improve banking transparency, he said.
UBS said in 2008 it would discontinue offshore accounts for US citizens. The firm now referred them to its wealth-management offices in the US, or to its Swiss financial advisers unit, which complied with US and Swiss regulations, Serge Steiner, a spokesman for UBS, said.
Bank of Singapore, the private-banking arm of Oversea-Chinese Banking has turned away millions of dollars from Americans because it did not want to deal with the regulatory hassle, according to chief executive Renato de Guzman.
“It’s too complex, too challenging,” de Guzman, said. “You probably should have a dedicated team to handle them or to understand what can be done or what cannot be done. We have enough business in Asia, so we don’t want to make our lives too difficult.”
Asia has the world’s fastest-growing number of people with more than US$1 million in investable assets, according to a report last year by Bank of America and Capgemini. Its millionaires’ list climbed 9.7 per cent in 2010 to 3.3 million people, higher than the 8.6 per cent growth in North America. The combined wealth of Asian millionaires increased to US$10.8 trillion, topping Europe for the first time, the report said.
HSBC decided last July that it would no longer offer wealth-management services to Americans from outside their home country after authorities began investigating the London-based bank’s US clients.
Americans would be “better served” by private bankers in the US, Goh Kong Aik, a spokesman for HSBC in Singapore, said. He declined to say whether those who already had accounts abroad would be allowed to remain customers, except that they would be helped through an undefined “transition process”.
Deutsche Bank said it terminated accounts held abroad by people with US residency last year. The action did not include cheque or savings accounts and did not affect citizens living outside the US. The Frankfurt-based bank said “only a small number of customers” were affected.
Spokesmen for Credit Suisse, France’s BNP Paribas and Amsterdam-based ABN Amro, also among the top 10 non-US global wealth managers, said their banks had not yet decided what to do with American accounts.
“Bank accounts, investment accounts, mortgages and insurance policies are being refused to American clients, and those with accounts are seeing them closed or have been threatened with closure,” Marylouise Serrato, executive director of American Citizens Abroad, a Geneva-based organisation, said.
US citizens living in countries not served by US banks may find themselves unable to bank at all, and the law in its current form could damage US businesses abroad, she said.
“Americans either will not be allowed to enter into international partnerships or live and work overseas, and will be replaced by foreign nationals who do not have these limitations,” Serrato said. “The extensive reporting requirements of Fatca will be destructive to those who wish to do business internationally as well as to those Americans who are legitimately living and working overseas.”
Financial institutions that chose not to accept American customers still must determine whether new or existing clients were “US persons” in order to comply with Fatca, according to Michael Brevetta, director of US tax consulting at PricewaterhouseCoopers in Singapore.
The definition included citizens, green-card holders and non-Americans deemed US residents by being in the country for at least 183 days over a three-year period, which made them subject to US tax on worldwide income, according to the IRS.
Penalties for not complying will be stiff. Non-US firms that do not make required disclosures will be subject to 30 per cent withholding of certain dividends, interest or proceeds from the sale of assets they or their customers received from US sources, according to Richard Weisman, Hong Kong-based head of law firm Baker & McKenzie’s global tax practice.
“Overwhelmingly, financial institutions outside the US don’t like it, for obvious reasons.”
He said the withholding tax was a “stick” the US was wielding. “The US is outsourcing a tax-compliance function, which is enormously expensive.”
Renouncing citizenship was an option chosen by some Americans, with a record 1,780 giving up their passports last year compared with 235 in 2008, the IRS reported.
Post a Comment