by Niko Kloeten
The Foreign Account Tax Compliance Act (FATCA), which comes into effect in stages over the next couple of years, is part of an effort by the US government and IRS (Internal Revenue Service) to crack down on overseas tax evasion by American citizens.
When fully implemented it will require 30% of any funds invested in America from overseas to be withheld by the IRS if the organisation investing the money isn't FATCA-compliant.
However, there could be some good news around the corner for New Zealand financial companies (including certain financial planning businesses) looking at having to deal with the IRS.
Australia is negotiating an inter-governmental agreement with the US that would make the reporting requirements of FATCA easier for Australian companies, and according to a local expert the New Zealand government is likely to follow suit.
PwC financial services partner Mark Russell said such a deal would make sense for our government for a number of reasons, including the fact that it would align us with Australia.
For instance, he said the Aussie-owned banks in New Zealand wouldn’t be covered by the Australian government’s agreement.
If New Zealand did ink a FATCA agreement with the US, local companies would report to our government rather than to the IRS, Russell said.
“It’s easier dealing with some government official in Wellington than people half-way around the world. Officials here generally have a can-do attitude and try to do the right thing,” he said.
“If you’re dealing with the IRS you’re literally one of hundreds of thousands of entities having to deal with them so getting a voice is very difficult.”
Revenue Minister Peter Dunne could not be immediately reached for comment on whether New Zealand is negotiating a FATCA deal.
Russell said he expected the government would make some sort of announcement on the issue in the next two or three weeks.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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