Financial services in danger of reform overload, warns John Brogden
The Australian financial services system is in danger of being unable to comply with the new foreign tax compliance system proposed by the United States, according to the Financial Services Council (FSC) chief executive officer, John Brogden.
Changes to the Foreign Account Tax Compliance Act (FATCA) regime will require Australian financial institutions - including superannuation funds - to collect detailed information on their members in order to determine whether their financial and residency arrangements make them a US taxpayer.
If the account holder does not provide the necessary information, the fund will be required to withhold a 30 per cent tax on US-connected payments for that member.
Addressing the US Treasury in Washington, Brogden said the Australian financial services industry already has "significant domestic regulatory changes to implement over the coming 12 months".
"FATCA will add a considerable additional compliance burden and cost to Australian financial institutions - unless intergovernmental agreement is reached," Brogden said.
If Australia's concerns are not addressed, Brogden said FATCA had the potential to cost the industry hundreds of millions of dollars.
"The FSC strongly supports the continuation of discussions between the Australian and United States governments on the establishment of an intergovernmental agreement as a matter of priority," Brogden added.
France, Germany, Italy, Spain and the United Kingdom have indicated their intention to enter into an intergovernmental agreement on FATCA, while it is understood that the Netherlands and Ireland are considering joining.
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