Mizuho Exec: "Asia Has Opportunity To Create Uniform Approach to Fatca"

The postponement of the start date for the Foreign Account Tax Compliance Act (Fatca) gives Asian countries an opportunity to agree on a consistent approach to the US anti-tax evasion regulation, and prevent operational complications for firms working across the region, an executive from Mizuho Securities told delegates at the Asia Pacific Financial Information Conference last month.

Under Fatca, non-US financial firms will be required to share information with the US Internal Revenue Service (IRS) about accounts held by US taxpayers. To satisfy domestic data privacy laws, a number of countries around the world have signalled their intention to sign bilateral agreements with the US Treasury in relation to the way the regulation will be implemented. Reporting requirements may now vary from jurisdiction to jurisdiction, depending on whether local regulators sign bilateral agreements with the Treasury and the terms of those agreements. Shaun Ansell, Hong Kong-based head of legal and compliance at Mizuho Securities, suggested that requiring firms in different countries to report different data sets will cause operational complexities.

Ansell explained that Mizuho Financial Group is regulated by the Japanese authorities, who have said they plan to sign a bilateral agreement that will mean financial institutions in the country will only have to report a limited set of data directly to the IRS. On the other hand, Mizuho's investment banking firm in Hong Kong is answerable to local authorities there, who have not made such a clear statement about their intended approach to Fatca. This may mean that while Mizuho Financial Group is required to report a limited set of data in Japan, the investment banking firm in Hong Kong is required to report a full set.

Ansell said the postponement of the start date for Fatca until January 1, 2014 gives authorities in Asian countries an opportunity to take a common approach to the regulation by signing similar intergovernmental agreements with the Treasury. He said if regulators in different countries take a uniform approach to Fatca, it will make compliance simpler for firms that work across the region. "You have a mishmash of different approaches [to Fatca] across Asia [at the moment]," he said. "The great thing about the delay in the timing to 2014 is it means you can have uniformity across the whole [region]. Clearly it would be better if everybody had the same approach."

David Weisner, Hong Kong-based US tax counsel for Asia Pacific at Citigroup and a member of an industry group that has discussed Fatca with Hong Kong's Financial Services and the Treasury Bureau, said Hong Kong's authorities are looking into the possibility of signing a bilateral agreement with the Treasury. "Hong Kong does have a lot of interest in [signing a bilateral agreement]," he said. "But they are thinking about how to approach it, how it is going to work in the political environment and how it is going to work under Hong Kong privacy rules."

Weisner said he has spoken to central banks in several other Asian countries that have also shown interest in the idea of bilateral agreements, but work still needs to be done to get everybody on board at the banks. "You see this interest in these bilateral agreements in various pockets of various governments in Asia because they see how good they are, but it is a question of moving through their own bureaucracy to get it done," he said.

Weisner said the Treasury is willing to sign bilateral agreements, but is waiting to be approached by countries rather than initiating discussions itself.