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ARCHIVE
Regulators and Industry Exchange FATCA Insights at ICI and ICI Global Webinar
By Keith Lawson
August 30, 2012
Senior officials from the U.S. Treasury Department and the Organization for Economic Cooperation and Development (OECD), along with industry experts, recently engaged in a very informative webinar discussion regarding a model intergovernmental agreement (IGA) for implementing the Foreign Account Tax Compliance Act (FATCA). The model IGA, as discussed in an earlier ICI Viewpoints post, was developed by the Treasury Department with the active cooperation of senior tax officials from France, Germany, Italy, Spain, and the United Kingdom.
A few of the webinar highlights are detailed below.
Strong Majority of Webinar Audience Sees Model IGAs as Very Useful
A diverse audience from 15 countries watched the webinar live and responded to polling questions regarding the usefulness of the IGAs and the time necessary, after FATCA regulations are finalized, to implement the law. Thirty percent of the audience was from outside the United States: 15 percent from Europe, 10 percent from the Americas (non-U.S.), and 5 percent from the Asia-Pacific region.
Audience polling question: How useful are the IGAs?
Extremely | 22% |
Very | 48% |
Somewhat | 28% |
Not | 2% |
Webinar Panelists Provide Detailed IGA Explanations
The webinar panelists included two Treasury Department officials: Manal Corwin, Treasury Deputy Assistant Secretary for International Tax Affairs, and her colleague Michael Plowgian, Attorney Advisor in the Office of the International Tax Counsel. These two officials have been most directly involved in the IGA discussions with other governments.
The other panelists were Grace Perez-Navarro, Deputy Director of the OECD’s Centre for Tax Policy and Administration; Mary Bennett, a Partner at Baker & McKenzie; Rebecca English, an Associate Tax Counsel with T. Rowe Price; and me.
Manal and Michael provided a detailed explanation of the model, released on July 26, that provides for reporting by financial institutions to their home-country tax authorities. Under this model, information about U.S. investors will be provided by the home-country tax authority to the Internal Revenue Service (IRS). Under the “reciprocal” version of this model (known as Model I), the IRS would provide information to the partner country’s tax authorities about the accounts of its taxpayers held by U.S. institutions. Under the “nonreciprocal” version of Model I, the IRS would receive, but not provide, tax information. The model includes an important annex (Annex II) that will identify certain financial institutions, such as retirement plans, that will be treated as “deemed compliant” for FATCA purposes.
A second model (Model II) is being developed with the active cooperation of senior tax officials from Switzerland and Japan. Under Model II, a partner country’s financial institutions would report tax information about U.S. investors directly to the IRS.
Both models contemplate that a partner country will enact legislation or adopt rules to implement FATCA reporting and address data privacy concerns. Under Model I, a financial institution will apply local laws (rather than IRS regulations) to determine an investor’s identity and report an investor’s income, assets, and other information, to its home-country tax authority. Under Model II, a financial institution will apply the IRS’s FATCA regulations.
Treasury Provides IGA Timing Guidance
The first IGAs most likely will be signed in September, and a significant number of signed IGAs are expected by the end of October. Many countries have expressed strong interest in signing IGAs. The IGA signing process is not expected to be too time-consuming, however, as Treasury does not intend to negotiate customized IGAs. The one place where customization is likely involves the types of institutions that will be exempt or deemed compliant under Annex II.
Industry Indicates Need for More Guidance, More Time
The industry requested guidance on several IGA-related issues, and the Treasury Department acknowledged that clarifications on several matters are necessary. One such issue involves the obligation, if any, to apply the FATCA regulations by a financial institution in a country that has signed an IGA but has not yet enacted enabling legislation.
The panel also discussed a number of variances between the IGAs and the FATCA proposed regulations and the prospects for enhanced consistency when the FATCA regulations are finalized. Treasury is considering guidance, for example, to harmonize the effective dates for withholding and reporting by U.S. institutions, IGA partner institutions, and non–IGA partner institutions.
Manal acknowledged the business community’s need for guidance and stated that the FATCA regulations should be finalized this fall. The industry responded that after the regulations are finalized, significant lead time will be required before FATCA can be implemented. Here are the polling results.
Audience polling question: How much time will you need to implement FATCA after the regulations are finalized?
More than twenty-four months | 7% |
Eighteen to twenty-four months | 42% |
Twelve to eighteen months | 48% |
Less than twelve months | 3% |
Education Efforts and Coordination with the OECD
U.S. government officials are reaching out to the business community (for example, through this webinar) and to other governments to explain the IGAs and seek broad adoption. Many industry groups are encouraging their governments to enter into IGA discussions because of the various benefits provided by an IGA. Model I is particularly attractive, the industry noted, because it eliminates the need to master the detailed FATCA regulations; instead, institutions will look to the IGA and the local law requirements to implement the agreement.
Grace discussed the OECD’s ongoing efforts to facilitate implementation of FATCA and to improve global standards for automatic exchange of tax information. She also described a session that will be held at the OECD’s headquarters on September 20, at which Treasury representatives will discuss the IGAs and solicit feedback from the global business community. Separately, a small ad hoc business advisory group will work with the OECD and governments on standards (such as database schema and transmission protocols) for implementing the IGAs. ICI Global is leading the business community’s ad hoc working group, which will meet with the OECD and its government members for the first time on September 19 and 20.
Keith Lawson is senior counsel, tax law for ICI and ICI Global.
TOPICS: ICI GlobalTaxes
The Public Deserves Accurate Reporting of the Debate over Money Market Funds
By Paul Schott Stevens
August 30, 2012
The Financial Times has recently published a story that significantly distorts recent developments around U.S. money market funds and the actions of the U.S. fund industry. Let’s correct the record.
TOPICS: Money Market Funds
JOBS Act Proposal Fails on Investor Protection
By Paul Schott Stevens
August 29, 2012
Today, the Securities and Exchange Commission (SEC) issued a proposal to implement an important part of the Jumpstart Our Business Startups Act, or JOBS Act.
TOPICS: Fund Regulation
Money Market Funds Work for Retirement Savers
By David Abbey
August 22, 2012
As they’ve examined possible changes for money market funds, regulators have heard from an extraordinary number of businesses, individuals, and organizations who have expressed their support for preserving the key characteristics of these funds.
TOPICS: Money Market Funds
Correcting the Record: The Power of the SEC’s 2010 Money Market Fund Reforms
By Mike McNamee
August 16, 2012
We’ve spent several days pointing out the myths and misstatements that regulators have put forward in their campaign to impose structural changes on money market funds.
TOPICS: Money Market Funds
Correcting the Record: Investor Protections in the SEC’s 2010 Money Market Fund Reforms
By Mike McNamee
August 15, 2012
We’ve said it before, and we’ll say it again: One of the most puzzling aspects of regulators’ campaign for changes to money market funds is their ability to ignore the dramatic improvements in these funds resulting from the regulatory reforms that the Securities and Exchange Commission (SEC) enacted in 2010.
TOPICS: Money Market Funds
Correcting the Record: What Money Market Fund Investors Know
By Mike McNamee
August 14, 2012
U.S. money market funds are one of the most transparent financial products on the planet.
TOPICS: Money Market Funds
Correcting the Record: Uncovering Regulators’ False Narrative of 2008
By Mike McNamee
August 13, 2012
The regulators who are campaigning for structural changes in money market funds are building their case in part on distortions, exaggerations, and misunderstandings about money market funds, their investors, and their role in the financial markets.
TOPICS: Money Market Funds
Correcting the Record on Money Market Funds
By Mike McNamee
August 12, 2012
Bad information can’t give rise to good policy. Unfortunately, the regulators who are campaigning for structural changes in money market funds are building their case on information that is deeply flawed at best.
TOPICS: Money Market Funds
The SEC’s Data Dump on Money Market Funds Is Misleading
By Paul Schott Stevens
August 10, 2012
The Securities and Exchange Commission (SEC) has finally delivered on Chairman Mary Schapiro’s June promise to give Congress data to back up her claim that money market fund sponsors “have voluntarily provided support to money market funds on more than 300 occasions.”
TOPICS: Money Market Funds
Better Disclosure: Distinguishing 529 Plans from Traditional Municipal Bond Offerings
By Tamara K. Salmon
August 8, 2012
The fund industry strongly supports effective public disclosure to ensure that retail and institutional investors can get the information they need to make sound investments. For disclosure to be effective, however, it has to align with marketplace realities.
TOPICS: Fund Regulation
How the Model Intergovernmental Agreement Reduces FATCA Burdens
By Keith Lawson
August 1, 2012
The U.S. Treasury Department has made significant progress with its July 26 release of a model intergovernmental agreement (IGA) for implementing the Foreign Account Tax Compliance Act (FATCA). This model IGA—developed with the active cooperation of senior tax officials from France, Germany, Italy, Spain, and the United Kingdom—addresses many of the U.S. and global fund industries’ concerns with the substantial compliance burdens placed by FATCA on funds, their distributors, and their investors. ICI and ICI Global applaud this development and look forward to continuing our dialogue with these governments on the FATCA regulations and the IGAs they craft based on the model.
TOPICS: ICI GlobalTaxes
Financial Times Column Mischaracterizes the Debate over Money Market Funds
By Paul Schott Stevens
August 1, 2012
We were disappointed to see how Gillian Tett’s recent Financial Times column (“The Achilles Heel of America’s Financial System”) mischaracterized the role of U.S. money market funds, the dramatic improvements resulting from the 2010 regulatory reforms, and the debate over further structural changes.
TOPICS: Money Market Funds
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