Tuesday, December 18, 2012
FATCA is going to be a really painful experience. Foreign Financial Institutions (FFI) will have a compliance nightmare, especially if they have to do a lot of withholding and remitting to the IRS. Already, the US Treasury is backing off on some things like allowing an FFI to register with the IRS and report to its own country, provided the country is a FATCA partner. This is a symptom of the level of difficulty faced by the participants to implement FATCA. This is probably why Japan and Australia have refused to comply. FATCA has two faces: one that requires individuals confess their foreign accounts to the IRS on Form 8938 and the other requires FFIs to report on their customers who are US Citizens or Permanent Residents. How the banks will know who to report on is unknown right now because someone can have multiple bank accounts and multiple banks. The focus of FATCA is not to collect withholding but to collect information. Where they really want to collect (but have not emphasized ) is going after "tax cheats" and "money launderers". What defines either is left up to the US Congress to define and redefine as needed. Some of the best tax avoidance tools are available domestically in the USA and do not require special reporting; but that is for another day.
Posted by Ken Shields at 7:29 AM