New legislation adds problems for Americans abroad
An inability to open a bank account is not news for everyone in Hong Kong. Just ask the long-suffering American residents.
“Nobody wants to deal with the US citizen account signatory, whether it is a company account or an account for my own financial needs,” said Ross Feingold, a director at the Association for Americans Resident Overseas, an advocacy organisation.
The issues concerning Americans and US registered companies historically stem from the country’s tax reporting requirements but are progressively being woven into a global shift towards transparency and sharing of personal financial records between banks and governments.
The centrepiece legislation is the Foreign Account Tax Compliance Act (Fatca), which requires financial institutions around the world to share information on any US signatory account with the US government. The law comes into force this year and threatens fines on firms that do not comply.
“Often the result is simple. The institution determines that the effort to track and report this data cannot be justified and the client’s business is declined. For US companies or persons with US tax reporting obligations who need to open a bank account, the options have become increasingly limited,” Feingold said.
Americans are required to pay US taxes even when living overseas and need to declare bank account details on their annual tax returns. Under Fatca, the financial institutions must report account holder details as well as financial transactions sourced from the US. The cost of complying with these rules has forced many banks to close the door to American clients.
Some of the motivation behind Fatca points to new global norms in how information is shared. “Changing practices in Hong Kong and Singapore regarding the opening of financial accounts are being driven by external forces – principally from the US, Europe and OECD. Financial needs and political dynamics in those countries have led to changes in international norms in this area. The OECD, G8 and now the G20 are very actively pursuing transparency, anti-money laundering, and now exchange of taxpayer information internationally,” American Chamber of Commerce governor Richard Weisman said.
In Europe in recent years, Switzerland and Luxembourg agreed to share client data or impose punitive taxes on clients from other European countries amid concerns from Britain, Germany, and the European Union over widespread tax evasion.
Maybe in the next five to 10 years you could remain anonymous, said Sergio Men, a managing partner at corporate services firm Intercorp, but after that it would no longer be possible. “If you don’t want to pay your US taxes,” he said, “go to Singapore and get a passport.”