Financial organisations expect to exceed their original budget for compliance with the US Foreign Account Tax Compliance Act, aka FATCA, according to a survey conducted by Thomson Reuters.
The firm conducted a survey of around 300 financial institutions (FIs) during a
‘FATCA Reporting: Are You Prepared?’
webinar and found that 55% expect to exceed their original budgets compared with 35% who say they expect to remain on budget.
Twenty-seven per cent expect their spend on FATCA compliance in 2015 to cost between US$100,000 and US$1m compared with only 16%, who believed this to be the case when asked the same question in January 2014. The increase of 11 percentage points suggests that FIs are only now beginning to appreciate the complexity and significant burden of FATCA.
Thomson Reuters said the timing of the online survey is of particular importance, coming just after the announcement by the Organisation for Economic Cooperation and Development (OECD) that 51 countries have signed up to the Common Reporting Standard (CRS), which will require increased reporting on an a greater number of customers.
“The whole problem of FATCA has just become bigger,” said Laurence Kiddle, managing director corporate market Europe, the Middle East and Africa (EMEA) for the tax and accounting business of Thomson Reuters.
“CRS is a game-changer. It dramatically widens the reporting scope and this puts massive strain on budgets. An FI needs to be able to identify the tax residence of each of their customers – not just whether or not they meet the definition of ‘American Person’ – and have the ability to report this to the relevant authorities. This increase in the scope, depth and complexity of reporting is a very significant challenge.”
FATCA reporting is due from the end of March 2015 and financial organisations are turning their attention to how manage their reporting obligations. According to the results of the same online survey, the preferred approach by 64% respondents is to employ third-party software solutions, either stand-alone or mixed with in-house and in-house build, to manage compliance.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
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