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FATCAT. Opps I mean FATCA

I’m sure someone with a sense of humour thought up this acronym. Now some of you may be asking what an earth is FATCA? It is the: “Foreign Account Tax Compliance Act” to be imposed by the United States of America in 2013. What does this mean for little ol’ New Zealanders in the financial industry?

Friday, December 2nd 2011, 6:05AM 6 Comments

by Goldie

To put it simply the USA is going to impose fines on any financial company, investment portfolio or custodial service who do not collect tax for them and pay to the Inland Revenue Service.

Why is the rest of the world bowing to this draconian imposition from the USA? Are we all running scared – and from what I ask?

I bet there are quite a few countries that totally ignore this imposition and tell the USA to run and jump.

Anyway, back to FATCA, what does it mean for us?

From what has been issued to date, it is going to be a huge cost to companies in the financial sector.

The following are just a few things I have heard about:
• First you have to become a registered company and enter into an agreement with the US.
• You have to investigate all of your customers to find out if they should be US tax payers and,
• Annually report to the US.
• Also there is a requirement to withhold payments for ‘recalcitrant’ US folks (the naughty ones who try to avoid paying tax back home) – 30% of both Income and proceeds from sale, I have heard.

You might think how will they know, but if any other financial organisations you deal with in the chain is registered they have an obligation to report. And it seems that most of the global companies are already acquiescing. I suppose with electronic trading they can trace all sorts of things.

If you think you can avoid this problem you will have to: restrict who you deal with and what you invest in – that is, no US folk and no US assets.

Probably well nigh impossible so we will all have to run along like little sheep and agree to do the USA’s work for them.

Why didn’t the rest of the world just say, “No”?

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Comments from our readers

On 5 December 2011 at 8:32 am Ivor said:
FACTCA is just the start. Other counties will soon follow suit. And why should they not?

It is about time that all citizens of the world pay the tax asked for by their respective governments so that the tax burden doesn't continue to increase on the compliant citizens.

Why impose new taxes on already tax burdened citizens when the current ones aren't being collected. In NZ alone the amount of tax being evaded by the tax cheats is 44% of our current Health Budget some $7Billion.

In the USA taxes evaded by the scum is $US100Billion.
Change your attitude. Don't bag the governments that are trying to recover unpaid taxes. Bag the scum that don't pay them.
On 7 December 2011 at 7:04 am Independent Observer said:
I tend to agree with Ivor. Whilst I’m all in favour of minimizing the tax we pay, that mustn’t be confused with avoiding paying tax. If Governments fail to get a fair contribution from its citizens, then the burden is left for the rest of us to carry.
On 7 December 2011 at 8:08 am Paranormal said:
Ivor and IO, with all due respect what a load of .... Your "tax cheats" are in all probability complying with the current laws. And what a load of bollocks around what the cost is. If it can be quantified the IRD would have got down on it already. you have been seriously misled by yet another politically motivated mantra.

The real issue is governments globally are spending more than their countries can afford. All governments have a responsibility to their citizens to behave in a responsible manner - a responsibility the majority are clearly avoiding.
On 12 December 2011 at 10:11 pm Moby said:
None of you understand the US tax system. They US is not interested in unpaid tax; they want FBAR penalties in particular as they are much more lucrative. And they aren't after US residents; they're after American citizens living in other countries (have lifelong reporting obligations to the US whereever they live) and NZ citizens that may have held greencards.

Example: Person is born in USA. Moves to NZ at 2 years old and never leaves NZ. Is currently 50 years old.

If that person has not filed FBARs then they are subject to penalties of 50% of their assets, per year, for up to six years. Don't believe me? Google "FBAR". The subject is far more complex than you can imagine, but the main point is that this has nothing to do with tax.
On 13 December 2011 at 8:06 am Fred said:
Ivor & IO are missing a key point. Any tax is bad if it costs more to administer than it raises. FATCA will cost billions in new systems, personnel and compliance world-wide, for a very modest amount of taxes raised, if any. Those costs will be imposed on middle-class savers, impeding their returns.
Of course the superyacht owners will not be inconvenienced - they do not invest in retail managed funds.
On 16 December 2011 at 12:32 am Accounting UK said:
I heard this word first time but nice information about FATCA. I have two questions that, this rule or I say this policy applicable for all states of US? And this FATCA is available in UK?
Commenting is closed

 

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