The US wants its tax money and will be implementing the Foreign Account Tax Compliance Act (FATCA) to help get it, so foreign companies should be prepared. In a new report, Aite Group analyst Virginie O’Shea and senior analyst Chris Thrappas provide an overview of the FATCA as it stands today, and assess its implementation by participating non-US financial institutions that must comply with this extraterritorial legislation starting in 2013.
- With trillion-dollar annual budget deficits in the US and a federal debt approaching 100% of gross domestic product (GDP), a US tax gap amounting to hundreds of billions of dollars each year cannot go ignored.
- In March 2010, the Hiring Incentives to Restore Employment (HIRE) Act, which contains the original FATCA provisions, was signed into law in the US. It forces foreign financial institutions to disclose to the US government information about clients subject to US taxation.
- It appears that the implementation of this legislation will be achieved via various bilateral, intergovernmental agreements rather than through a single law applicable to all financial institutions worldwide.
While compliance will be costly and onerous, Aite Group expects the real costs for individual firms to vary based on the state of the client account data in question and the technology and systems framework that stores that data.
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