G20 tax push to hit hard in finance sector
With the US Fatca law effectively going global, compliance costs for data-sharing initiative will be heavy for financial institutions, analysts say
The G20 plan to combat tax evasion will enable the member states, including China, to have their own version of the United States' Foreign Account Tax Compliance Act (Fatca) that shines a spotlight on US tax dodgers around the world, say analysts.
The plan by the Group of 20 nations will create huge burdens of compliance for financial institutions around the world, including Hong Kong's financial sector, analysts predict.
At the G20 summit in St Petersburg this month, the leaders of 20 key economies declared member states will start exchanging tax information automatically by the end of 2015.
If this plan was successfully implemented, G20 governments could obtain information about the investment income of their taxpayers overseas, similar to the Fatca provisions, said Richard Weisman, a registered foreign lawyer of Baker & McKenzie, an international law firm. "The G20 tax proposal is like the application of Fatca internationally."
Fatca requires financial institutions around the world to give information on US taxpayers to Washington, making it harder for US taxpayers to evade taxes.
"For China to have its own Fatca means it would want to know about financial assets kept and income received by Chinese nationals outside China," said Patrick Yip, a deputy tax managing partner of Deloitte Touche Tohmatsu.