WASHINGTON, May 15 (Reuters) - Financial institutions from around the world called for delay and changes to soften proposed U.S. rules to combat offshore tax evasion at an Internal Revenue Service hearing on Tuesday.
Government tax officials gave no indication about how they would respond to the businesses’ requests and said the final rules were on track to be ready within three to four months.
With just months to go before implementation of the Foreign Account Tax Compliance Act, representatives from a range of businesses complained that FATCA’s rules would cause confusion and reporting errors that could destabilize markets.
Enacted by Congress in 2010, FATCA is intended to help the IRS gather information about Americans’ accounts holding more than $50,000 in assets in foreign banks and other institutions.
Since the law was signed, businesses have been fighting for more leniency. Proposed FATCA rules issued in February did limit its scope somewhat and delayed some start dates.
The law is coming at a time when cash-strapped governments around the world are trying to collect more tax revenue under existing law, rather than raise tax rates. Congress’ Joint Committee on Taxation has estimated FATCA will bring $792 million a year more to the federal government.
As proposed, the FATCA rules would require most banks and financial institutions worldwide to gather information and disclose it to the IRS. Its f i rst phase is set to begin in 2013.
“This is having far-reaching consequences that I don’t think the Congress anticipated,” said Michael Edwards, chief counsel with the World Council of Credit Unions Inc, an industry group.
Jacob Braun, a Bank of New York Mellon managing director, called on tax officials to delay FATCA’s start date until 2014. He said financial institutions would need at least 12 to 18 months to get ready for the law once it was finalized.
The United States is working with other countries to set up information sharing agreements to ease the burden of compliance, said Jesse Eggert, associate international tax counsel at the U.S. Treasury Department.
The Treasury Department announced in February proposed pacts with five European countries to become “FATCA partners.” For nations not invited to become FATCA partners, institutions in those countries must cooperate on their own with the IRS.