Govt urged to secure US IGA
Top-tier accountancy and tax consultancy Ernst and Young has urged the Federal Government to progress the negotiation of an Intergovernmental Agreement (IGA) with the United States to ensure local firms are not at a disadvantage with respect to new US regulations - the Foreign Account Tax Compliance Act.
Ernst and Young Oceania banking and capital markets leader, Paul Siviour, said the completion of an IGA between the US and Australia would allow Australian financial institutions to report to the Australian Taxation Office (ATO) rather than the US Internal Revenue Service.
"By allowing Australian financial institutions to report to the ATO rather than directly to the IRS, an IGA would help avoid conflicts with local laws, such as data privacy," he said.
"It would also go a long way to lessening the compliance burden on local financial institutions by substantially reducing withholding requirements."
The new US regulations have been developed to assist the US Government in tracking down the overseas assets and income of US tax evaders.
Under the new rules foreign financial institutions are required to identify all US customers, report back to the US and potentially withhold customer funds on certain types of income.
Financial institutions which don't comply with the regulations face the possibility of a 30 per cent withholding tax on payments they receive from US sources.
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