World Council of Credit Unions (Woccu) vice-president and chief counsel Michael Edwards believes that credit unions will face severe issues implementing the new US Foreign Account Tax Compliance Act, better known as Fatca.
The act creates a significant regulatory burden for banks, credit unions and many government agencies that cooperate with the United States. Many in the financial services industry would prefer if Fatca “did not exist”, Woccu vice-president and chief counsel Michael Edwards claims.
Even US-based banks and credit unions may face regulatory issues due to the new legislation. Although the statute doesn’t specifically mention US credit unions and banks, as part of the information collecting efforts required to enforce the act, the United States government may need to collect data from US-based credit unions.
The law will “not result in finding information on many foreigners”, despite being a significant burden to both US and international credit unions. As most credit unions have local residents as board members, the administrative cost of Fatca could be an immense burden to US-based credit unions in particular.
Numerous international banks and credit unions have objected to Fatca, noting its immense administrative costs. Banks in countries like Switzerland and Singapore have reportedly turned away US customers interested in becoming account holders due to the immense administrative costs associated with their business.
The legislation was introduced to reduce offshore tax evasion by US citizens. Critics of the act claim that, instead of reducing tax evasion, it simply increases the cost of doing business with US-based account holders and companies for banks based in countries believed to be tax havens.
While the act has run into opposition in the United States, political experts believe that a repeal is unlikely. Tax evasion is a hot political topic in the United States and the repeal of a bill – even an ineffective one – designed to reduce it would be very unlikely, tax experts claim.
