Marc Gerson Discusses Foreign Account Tax Compliance Act in Compliance Week

“Tax Act Would Deputize Banks to Report Tax Evaders”
Compliance Week
12.03.09

Marc Gerson and Kim Majure comment on the Foreign Account Tax Compliance Act of 2009, which targets off-shore tax shelters. “The major provisions are things that basically increase the amount of information reporting about payments to foreign financial institutions,” says Gerson. “This puts a reporting requirement primarily on non-U.S. financial institutions to be the information provider to the (Internal Revenue Service). If a financial institution doesn’t satisfy certain reporting requirements, a 30-percent withholding is supposed to apply.”

Majure says the bill takes an indirect approach by targeting foreign financial and non-financial lenders rather than taxpayers. The proposal also repeals tax benefits related to foreign-marketed bearer bonds, she says, which would create a great deal of pressure on foreign lending. “If the result is significant capital flight, U.S. companies could get stuck with higher cost of any remaining capital,” Majure says.

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