NZ To Negotiate FATCA Agreement With US
Tuesday, October 30, 2012
The New Zealand government has announced its intention to negotiate a Foreign
Account Tax Compliance Act (FATCA) tax information agreement with the US.
FATCA was enacted by the US Congress in March, 2010. It is intended to ensure
that the US tax authorities obtain information on financial accounts held by
US taxpayers, or by foreign entities in which US taxpayers hold a substantial
ownership interest, at Foreign Financial Institutions (FIIs) including banks,
investment funds, insurance companies, foreign trusts and foreign corporations.
FIIs are required to enter into agreements with the US Internal Revenue Service
(IRS) and Treasury, to provide such details. Failure by an FFI to disclose information
would result in a requirement to withhold 30% tax on US-source income.
According to New Zealand's Revenue Minister Peter Dunne, while New Zealand
fully supports the move to clamp down on tax evasion, the government wants to
ensure that information is exchanged through existing channels. He explained:
"Without an inter-governmental agreement, financial institutions would have
to enter into separate agreements with the IRS, withhold tax on certain accounts,
and risk being in conflict with New Zealand's privacy and human rights laws".
An intergovernmental agreement would materially reduce FATCA compliance, Dunne
said, and would also help address a number of concerns because financial institutions
will not have to provide information directly to the IRS.
The Cabinet has agreed to lodge an expression of interest in negotiating a
FATCA tax information agreement. "This agreement will mean we can help
to support FATCA's objectives and play our part in dealing with international
tax evasion, while at the same time ensuring that the compliance costs for New
Zealand institutions are manageable," Dunne stressed.
A joint working group comprising private sector representatives and officials
is being formed to work through FATCA issues.