Advisers forced to dob in American clients

The Foreign Account Tax Compliant Act (FATCA), designed as part of a US crackdown on overseas tax evasion, is creating headaches for the financial services industry not just in New Zealand but around the world.

The Act will require 30% of any funds invested in America from overseas to be withheld by the Inland Revenue Service (IRS) if the organisation investing the money isn't FATCA-compliant.

Draft FATCA regulations were released last week by the US Department of Treasury and the IRS, and PwC financial services partner Mark Russell said New Zealand's financial services industry still has work to be done before it is seen as compliant with the new rules.

He said a big problem is that the information sharing required by FATCA is actually illegal in a number of countries, including New Zealand under the Privacy Act.