Bankers from around the world told the Internal Revenue Service that proposed U.S. rules requiring reporting of Americans’ overseas bank accounts are too burdensome and must be changed.
“The rules need to be streamlined and simplified significantly” so they can be used by bank employees around the world who don’t speak English, said Andrew Barkin, managing director and head of U.S. tax at Bank of Tokyo-Mitsubishi UFJ Ltd. He spoke on behalf of the Institute of International Bankers at an IRS hearing today in Washington.
The rules implement the Foreign Account Tax Compliance Act, a 2010 law designed to make it more difficult for U.S. citizens to hide money outside the country. Many provisions of the law take effect in 2013, and overseas banks will be required to tell the IRS annually about the balances and activity in their U.S. customers’ accounts.
Because of the law, some Asian banks have started turning away U.S. customers, and financial institutions from Japan, Switzerland, Australia and Brazil have lodged concerns with the U.S. Many argue that the U.S. is outsourcing its tax compliance to banks around the world and imposing rules that conflict with local laws and regulations.
Under the law, the U.S. will impose a 30 percent tax on some U.S.-related payments being sent to financial institutions outside the country that don’t comply with the rules.
Representatives of the Swiss Bankers Association, the Japanese Securities Dealers Association and the Financial Services Council of Australia spoke at today’s hearing.
Speakers asked for flexibility from the IRS, agreements between the U.S. and other countries, and rules that are less stringent for insurance companies, credit unions and retirement funds.
Harris Horowitz, head of global tax for BlackRock Inc. (BLK:US), said in a telephone interview before the hearing that portfolio managers of global funds may not want to purchase U.S. securities because the funds would be subject to the 2010 law. Foreign investors may choose not to invest in funds that include U.S. securities because they could be penalized if they work with a foreign broker who isn’t compliant, he said.
The IRS issued temporary rules in February and will consider changes before making those rules final. The IRS can’t rescind the law.
The expansion of rules is making personal finance decisions difficult for U.S. citizens who live outside of the country and are trying to comply, said Joseph Green, who lives in Canada.
“Hundreds of thousands of us around the world face the same problems: the escalation in tax filing and complexity and the associated angst that’s created is more severe than perhaps you recognize,” said Green, who spoke at the hearing on behalf of Democratic Party members living abroad.
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