Marc Gerson Discusses The Foreign Account Tax Compliance Act on CFO.com
“Hunting Tax Dodgers, Hitting Banks”
Marc Gerson and Kim Majure commented on the Foreign Account Tax Compliance Act of 2009, which targets off-shore tax shelters. According to Majure, the extra burden and expense involved in complying with the provision could dampen the appetite of foreign banks for the U.S. capital markets, thus tightening the screws on an already-tight credit market. "Anytime you begin squeezing the foreign market, you start making it a little harder for U.S. borrowers to get sources of financing," Majure said. Under the proposed law, if a foreign financial institution wanted to participate in the U.S. capital markets, it would have to help hunt down its tax-shy U.S. customers and turn them over to the IRS. "It is a very new approach to finding U.S. tax evaders," she added.
Gerson said while larger entities may have the resources to comply with the provision, smaller ones could find compliance too burdensome. As a result, "there may be some foreign financial institutions that scrap playing in the U.S. markets completely." Gerson added that the provision has received strong bipartisan support, so it is likely to survive intact in the final version of the tax extenders bill.