However, with the announcement this week that Europe’s largest five countries – the so-called EU G5 – are planning to begin sharing tax information with one another, under a deal modelled on a reporting structure contrived to handle their FATCA reporting obligations to the US, it seems clear that FATCA is well and truly not just about Americans any longer.
As reported, the UK Government today announced that it has agreed a deal with France, Germany, Italy and Spain to develop a new "multi-lateral tax information exchange agreement". It is the latest in a series of FATCA-type agreements to be unveiled since the Americans stunned the world with their Foreign Account Tax Compliance Act in 2010, aimed at cracking down on US citizens who make use of foreign bank accounts, trusts and other overseas financial instruments to evade their US taxes.
According to a statement announcing the new agreement this afternoon, HM Revenue & Customs said that the new agreement between the five EU countries is envisioned as being similar to a model intergovernmental agreement (IGA) for complying with the US FATCA that these same countries agreed to last year, with the Americans.
The terms of the new agreement have been set out in a joint letter that has been sent to the European Commission, which was signed by UK Prime Minister George Osborne and the four other G5 leaders.
Hardly a surprise
Echoing the comments of others, George Hodgson, Deputy CEO of the Society of Trust and Estate Practitioners, told International Adviser that a G5 FATCA, or something similar, hardly came as a surprise.
“From the start of the G-5’s discussions with the US, it has been apparent that the IGA model was seen as a likely template for automatic information exchange within the EU," Hodgson said.
The new deal, Hodgson added, "clearly raises questions about the EU attempts to reform the Savings Tax Directive, particularly since what the financial services industry wants to avoid above all else is a multiplicity of different tax information reporting requirements for cross-border clients.”
Peter De Proft, director general of the European Fund and Asset management Association, concurred with Hodgson’s observations that the agreement unveiled today had been "expected, in way or another”.
De Proft said he had yet to see the details of the plan announced today, and therefore he could not comment on the practicalities of implementing it. But he noted that a favourable attitude towards some kind of information exchange arrangement between the EU member states had been brewing for some time.
‘Good news for TPAs’
Alan Morgan-Moodie, chief executive officer of the Association of Life Offices (AILO), said the "G5 FATCA" was good news not just for the tax coffers of the five countries in question, but also for the software providers and third party administrators (TPAs) who will be tasked with the formidable job of developing the systems for collecting what will unavoidably end up being a huge amount of information.
The losers, he said, will be anyone in these countries who has money in a life insurance product, bank or savings account, as they will be the ones who will have to pay for the new information-collecting infrastucture, in the form of added costs.
That said, AILO members are already fairly well down the compliance road, since they already have to report to the tax authorities on activities having to do with the policies of their members whenever there is a "chargeable event", such as a surrender or partial withdrawal, or death of the policyholder, Morgan-Moodie said. "And that’s been the case for quite a number of years.
"What is misleading, though, is to say that this is all about tax compliance," he added.
"It’s actually all about reporting, and tracking the wealth of the population, and where it resides. And it is the end of any form of confidentiality, certainly throughout Europe and the US, and I’m sure it will percolate into other areas, such as Latin America."
Morgan-Moodie predicted that the agreement unveiled today is likely to force the EU Savings Directive back onto a front burner of EU ministers’ agendas, as it had been seen as the natural channel along which the FATCA information was expected to "percolate along".
