IRS to take “macro” approach on U.S. foreign bank law
By Kim Dixon
WASHINGTON, March 2 (Reuters) – Foreign banks will likely not need to identify holders of millions of U.S. accounts individually, a top U.S. tax official said, in the run-up to a new reporting law aimed at catching wealthy tax dodgers.
The law, expected to be passed by the U.S. Congress in coming months, would slap a 30 percent withholding tax on U.S. income of foreign financial institutions if they fail to report U.S. account holders, among other provisions.
It comes amid sharpened focus on wealthy Americans stashing funds abroad, in particular after a landmark settlement with the Swiss bank UBS AG last year in which the bank admitted it actively helped Americans dodge billions in taxes.
“I don’t know how many millions it would be — but can you imagine trying to go account by account?” Steven Musher, associate chief counsel for international affairs at the Internal Revenue Service, said on the sidelines of a foreign bankers meeting in Washington.
Musher told the bankers earlier that the IRS, charged with implementing the law, would be looking at banks’ “macro processes” rather than expecting them to meticulously identify their millions of accounts.
Foreign banks have been lobbying to soften the law and complained about the cost of compliance.
One big worry among industry is that the law effectively “deputizes the foreign financial institutions to become enforcers,” said Yaron Reich, an attorney with Cleary, Gottlieb who has industry clients.
The law also applies across financial institutions, to hedge funds and private equity funds.
“This will involve the full range of business lines of a bank,” Reich said.
Another U.S. official said there are likely to be more lenient rules for existing accounts, compared with new accounts.
If enacted, the law would go in effect Dec. 31, 2012.
(Editing by Leslie Adler) ((Reporting by Kim Dixon; email@example.com; +1 202 354-5864; Reuters Messaging:firstname.lastname@example.org)