Asian lenders worried over US foreign account law
Asian banks are hesitant to comply with the stricter tax law of the United States governing its overseas citizens, citing “negative implications” on countries in the region.
At its general membership meeting in Ulanbaatar, Mongolia last week, the Asian Bankers Association (ABA) said it would launch a survey for the region’s banks to determine the issues being faced by policymakers and private sector players in complying with the US Foreign Account Tax Compliance Act (Fatca).
Under Fatca, Asian banks that provide information about their American clients to the US Internal Revenue Service (IRS) will be granted exemption from the 30-percent withholding tax on their earnings from US operations.
This is part of the Obama administration’s efforts to catch tax cheats who hide their money in foreign countries, away from the US Government’s prying eyes.
In a paper published at its meeting last week, ABA said “Fatca and the proposed regulations that are being considered by the US Treasury Department to implement it are raising deep concerns among financial institutions throughout the world, especially Asian banks.”
“Identifying some of the negative implications of Fatca on banks and financial institutions, the paper called on ABA member-banks to start its dialogue with their respective governments as soon as possible on the best approaches for mitigating the adverse impact (of the law) on their operations,” ABA said in a communique sent to reporters.
ABA said it would conduct a survey among its members to obtain information on the issues they face in complying with the Fatca’s rules. “The survey results are expected present a reference point each one may benchmark against, and perhaps calibrate their own responses thereafter,” ABA said.
Local banks have until Oct. 25 to register with the IRS and agree to provide information on their US clients.
BSP Deputy Governor Nestor A. Espenilla Jr. said while compliance with Fatca rules was not a requirement under existing regulations in the country, local banks might still be affected if they would ignore the US’ request.
“Any bank has the option. If they don’t want the hassle, then they shouldn’t do business with US nationals, but that would be impractical for major banks,” he said in a previous interview.
He said banks that have overseas Filipino workers (OFW) clients who have gained US citizenship would also have to comply with Fatca rules or face higher taxes on revenues from the US.