Fatca could send fund groups ‘back to the dark ages’
Fund groups could go “back to the dark ages”, selling only domestically, if other countries adopt a version of the new US tax regime, an expert has warned.
Nigel Fleming, director for international tax at BlackRock and chair of the IMA’s tax committee, said the US was “playing a long game” in setting up the framework for a global tax system which other countries could then implement.
The tax regime, known as the Foreign Account Tax Compliance Act (Fatca), targets US citizens avoiding tax by investing overseas, and will force all financial companies to report directly to the Internal Revenue Service (IRS).
The implementation of the project is expected to cause fund managers and other financial institutions billions of dollars in compliance and updates to computer systems.
Mr Fleming said: “A global Fatca framework will be a game changer as it becomes a global tax network. At the moment, if you are sure you do not have any US clients then you are deemed compliant.
“Once you introduce a single other country into Fatca then it doesn’t work. We could go back to the dark ages when companies were only selling to domestic investors.”
The UK and other European governments have proposed an agreement with the US to aid reporting by using existing tax reporting agreements to pass information to the IRS.