Tax evasion law "could cost big banks $100 million"

MILAN Fri Nov 18, 2011 10:54am EST

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MILAN (Reuters) - A U.S. law aimed at curbing tax evasion by citizens using foreign accounts could cost large multinational banks as much as $100 million apiece to implement in one-off systems costs, a top asset manager and a tax lawyer told a conference on Friday.

The overall costs of implementing the Foreign Account Tax Compliance Act (FATCA), could approach the more than $8 billion FATCA is due to raise over 10 years, he said.

FATCA was introduced after high profile tax evasion cases.

"With FATCA there is a cost on us in Europe but benefits in the U.S.. The benefit is $8.5 bln over 10 years ... for multinational banks I have seen estimates of $100 million (each, in one-off costs)," said James Broderick, head of Europe, Middle East and Africa for JP Morgan Asset Management.

"It would be easier to just write a cheque to the IRS (U.S. tax authority)", he added.

The $100 million figure is with regard to the costs of implementation for the banking systems of large, multi-jurisdictional banks, and not for an asset manager, he said.

Speaking at the same conference, organized by Italy's asset management association Assogestioni, tax expert Keith Lawson said he had also heard the $100 mln figure.

Lawson, Senior Counsel Tax Law at ICI, the U.S. national association of U.S. investment companies, said aspects of FATCA were "draconian" but a repeal would be very difficult given the amount it would raise.

Broderick said banks and wealth managers had to accept that FATCA, which starts coming into force in June 2013, would be implemented and they may have to change their business models.

FATCA has drawn wide criticism from abroad, with banks and business people saying the new law turns them into agents of the IRS.

(Writing by Nigel Tutt; Editing by Greg Mahlich)

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Comments (1)
ajinscotland wrote:
Interesting to see what US politicians are saying about costs in their own back yard.

It was recently reported that Representative Charles Boustany of Louisiana, the Republican chairman of the House Ways and Means oversight subcommittee, called on Treasury Secretary Timothy Geithner to “suspend” an Internal Revenue Service proposal that would require banks to identify overseas depositors.
In a letter sent to Geithner Boustany said the measure “serves no compelling tax collection purpose.” “Instead, it is my understanding that the IRS seeks this new authority to help foreign governments collect their own taxes abroad,” “While the United States continues to be a leader in efforts to fight international tax evasion, imposing unnecessary burdens on U.S. banks is the wrong way to address the problem.”

Boustany was commenting on an IRS proposal that if enacted would require U.S. banks to report the identities of overseas customers who receive more than $10 in interest during a calendar year.

Nov 21, 2011 3:09pm EST  --  Report as abuse
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