Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

A New World Order of Financial and Business Information Transparency

Posted by William Byrnes on January 23, 2014


The countries of the world, pushed by a U.S. Treasury promotional campaign, have inevitably capitulated to the U.S. unilateral demand for information although the per-country compliance cost may exceed one billion dollars and privacy protection laws must be amended.  However, push back by important U.S. trading partners resulted in the U.S. Treasury entering into an expanding network of bi-lateral intergovernmental agreements that in most instances provide for automatic exchange between the competent authorities of the required financial information to fulfill FATCA compliance.  These agreements may lead to an imposition of FATCA reporting compliance, though to a lesser extent, upon U.S. financial institutions, that the U.S. Treasury may in turn provide automatically to the foreign competent authority.

FATCA should not be observed in a historical vacuum but instead requires at least an understanding of the U.S. previous attempt to collect such information under the qualified intermediary (‘QI’) regime.  Moreover, FATCA should not be observed in a unilateral vacuum but instead requires an overview of the EU and OECD information exchange initiatives and challenges thereto, tax collection and remission alternatives, as well as an overview of the spawn of FATCA (e.g. the UK’s son-of-FATCA approach). 

This discussion will also explore the general nature, issues, and challenges of information collection and exchange.  During this discussion we will digress into the topic of the information of a business’ financials and of its operations, the topic of domestic and cross border asymmetry of information, as well as the dialogue for global harmonization of information (such as standardization of accounts and of tax base determination), and for exchange of such information.  Such conversation is necessary for a robust understanding of the topics of base erosion and the efforts of countries to control ‘transfer pricing’. 

FATCA Compliance Program and Manual

Fifty contributing authors from the professional and financial industry provide 600 pages of expert analysis within the LexisNexis® Guide to FATCA Compliance (2nd Edition): many perspectives crafted into one, coherent voice by primary author William Byrnes.  The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of FATCA’s application for certain trading partners of the U.S. (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

2 Responses to “A New World Order of Financial and Business Information Transparency”

  1. […] https://profwilliambyrnes.com/2014/01/23/a-new-world-order-of-financial-and-business-information-tran… […]

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  2. tomazz1 said

    FATCA isn’t going to have any adverse effects on the big offshore bond funds – like the 137 big ones Bain Capital runs through the Cayman Islands.
    http://www.baincapital.com/
    And here’s the real kicker/bonus right out of our US TAX Code.. There is no interest withholding tax on interest income sent offshore to “Romney’s Bain Capital (or PIMCO’s funds, etc.), mulltibillion dollar offshore bond funds either, because the US eliminated the withholding tax on portfolio interest (ordinarily 30%) for publicly traded bonds (including the US treasury’s own bond issues) long ago.

    So, not only do these 137 Cayman offshore funds belonging to Bain not have to pay any US taxes here, they don’t have to file US income tax returns either.

    For example, on a billion dollars in corporate bonds paying 5% annually (or $50,000,000) they pay zero US tax! How do you beat that?

    http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts …. Note Romney filed form 8621 for 10 QEFs in 2010. FATCA isn’t going to bother him.

    “Romney’s personal tax rate is a particular point of interest. In 2010 and 2011 Mitt and Ann paid $6.2 million in federal tax on $42.5 million in income for an average tax rate just shy of 15 percent substantially less than what most middle-income Americans pay.” = Tax Notes (source).

    That all being said and done.. you still have to know how to organize your OWN personal holding companies/PFIC/QEFs offshore to take advantage of great money managers like Mitt Romney and Bain Capital.

    There’s an outline and post of how this is done at this link below by yours truly…
    https://profwilliambyrnes.com/2014/01/14/fatca-ffi-agreement-technical-corrections-released-by-irs/#comments

    Come one.. come all!
    Cheers!

    Thomas Azzara
    Overseas agent – Anguilla registrar
    (since 2001)
    Company Formations/Trusts
    New Providence Estate Planners, Ltd.
    (since 1995)
    54 Sandyport Drive
    P.O. Box CB 11552
    Nassau Bahamas
    1 242 327 7359
    Fax/phone: (242) 327-7359
    E-mail: taxman@batelnet.bs

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