US seeks money data directly from Pak banks; govt resists
ISLAMABAD: The US authorities have made direct contacts with Pakistani commercial banks to seek data of account holders of their nationals in a bid to comply with their law known as the Foreign Account Tax Compliance Act (Fatca), The News has learnt.
However, the Nawaz Sharif government has taken a strong exception to the US move for forcing and luring banks and other financial institutions to get the desired data directly without having any involvement of official channels.
The Government of Pakistan has offered the USA to sign an agreement to exchange this data at the level of the two governments.Islamabad wants that it should have the same data sharing facility of its own citizens residing in the USA in order to get a level playing field.
A working group has been established under the supervision of the Finance Division and for holding talks with the US authorities to finalise a mechanism for sharing the data of bank account holders acceptable to both sides.
A question was sent to the US Embassy in Islamabad inquiring whether the US was making efforts to get information from the Pakistani banks, stock brokers, hedge funds, insurance and trusts on foreign account tax compliance act. “Are you making direct contacts or will sign an agreement with Govt of Pakistan to get this data?” Till the filing of the report, this correspondent got no response.
However, the Fatca targets tax non compliance by US taxpayers having foreign accounts. But in case of Pakistan, the tax non-compliance is a rampant phenomena, so Washington should come up with a mechanism that benefits the Pakistani authorities as well in their efforts to broaden the narrowed tax base. “The US authorities did make direct contacts with Pakistani banks and other financial institutions to seek data of bank accounts and other transactions of thousands of their citizens who are operating their accounts under their law,” high-level sources said.
Both sides, according to the sources, have discussed this issue in recent weeks and modalities are being finalised to share this data within the government channels,” a top official who participated in the recent talks held in Islamabad confided to The News in a background interview here on Friday.
The Fatca was passed in 2010 in the USA and starting from July 1, 2014, foreign financial institutions (FFI) will be required by the US government, under Fatca, to report information regarding accounts of all US citizens (living in the US and abroad), US “persons,” green card holders and individuals holding certain US investments to the IRS.
This law requires foreign financial institutions such as local banks, stock brokers, hedge funds, insurance companies, trusts, etc. to report directly to the IRS all their clients who are “US persons”.
The foreign financial institutions (FFIs) that do not become compliant will be subject to a 30% withholding on their US investments when they are cashed in, which will directly impact the FFI clients with US holdings.
Many FFIs have simply chosen to eliminate their US citizens and US person client basis in order to minimise their exposure to Fatca reporting requirements, withholding fees and potential penalties.
The US Treasury has entered into Intergovernmental Agreements (IGAs) with a limited number of countries which will facilitate the transfer of information. The IGA agreements do include a non-discriminatory clause that is aimed at helping to alleviate issues of lock-out of banking services to US citizens and US persons.
