Doubts About Effectiveness Of FATCA
Banks and financial institutions the world over were worried about the legal and reputational costs of falling foul of FATCA (the United States Foreign Account Tax Compliance Act) from the outset. However, what if an entire country ends up missing a FATCA deadline? And this is no mere hypothetical question either. It’s happened. Recently it emerged that the Caribbean territory of Saint Vincent and the Grenadines has requested a 60-day extension from the reporting deadlines under FATCA.
So what will happen? Will SVG now be hauled over the coals by the United States Department of Justice and the Internal Revenue Service? I doubt that, but we’ll have to wait and see. I think it’s probably the territory’s financial institutions that are sweating the most.
Then again, things have gone remarkably quiet on the FATCA front. Successful FATCA-related prosecutions have been very few and far between. In fact, only one individual has been successfully prosecuted in the United States for failing to comply with the law. According to the Justice Department’s September 11 announcement, this involved the former chief executive of a bank with operations in Hungary and, coincidentally, Saint Vincent and the Grenadines, who agreed to bypass FATCA reporting regulations for potential clients who turned out to be undercover agents.
Perhaps the key word here is “successful.” Does this mean any other FATCA cases have been unsuccessfully prosecuted? Surely by now, thousands of tax-malcontents should have been scooped up by FATCA and subjected to the full wrath of the authorities? Maybe even the odd bank or two as well. Intriguing…
This raises further questions: is FATCA doing the job it’s supposed to do – i.e. make sure people with cross-border financial affairs pay the correct amount of tax? Or is it failing to do its job? Has FATCA just added to the regulatory burden of the global finance industry, the Internal Revenue Service and other revenue authorities for no meaningful gain? Or is it purring away in the background like a well-oiled machine?
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look