The Bankers Association of the Republic of China is pleading for the government to help local banks resist a US requirement that they help track overseas tax evaders because of concerns over legal and technical difficulties fulfilling the requirement.
In April, the US passed the Foreign Account Tax Compliance Act, which requires all foreign banks with US account holders to annually report to US taxation authorities about their US customers’ activities.
Lenders will also be required to collect from any US customers unwilling to have their activities reported a 30 percent withholding tax on US income. Banks that do not comply will themselves be subject to a 30 percent withholding tax on all US sources of income, including the sale of US securities, the act says.
The association plans to organize a seminar on Monday to build a consensus and ask for the government’s help to avert any potential fallout. The US law is scheduled to take effect in 2014.
Taiwanese lenders are not obligated to accommodate the requirements of the US act since there is not a bilateral taxation agreement between the US and Taiwan, the association said.
The reporting requirement would also pose legal challenges because it would run counter to the confidentiality protection that is guaranteed to wealth management customers regardless of their nationality, the association said.
Further, Taiwanese banks do not keep separate files on US customers — defined as both US citizens and those with permanent US residency — and creating such files would incur tremendous financial costs because many Taiwanese have dual citizenship, the association added.
Currently, foreign account holders are already subject to a 10 percent withholding tax on income earned in Taiwan and an extra 30 percent withholding tax would lead to double taxation, the association said.
Officials from Washington and Taipei should sit down and work out a taxation agreement to help guide Taiwanese banks on how to be cooperative, the association said.
The association also suggested raising the reporting threshold in deposit accounts from US$50,000 to US$100,000, to make the measure more reasonable since in the US the tax exemption level is set at US$92,900.
The association plans to put forward a position paper calling on the Ministry of Finance and the Financial Supervisory Commission to help banks avoid any dilemmas.
Financial Supervisory Commission Vice Chairwoman Lee Jih-chu (李紀珠) told the Chinese-language United Daily News that the commission is gaining a better grasp of the situation and would step in, if necessary.
However, Lee said the US has yet to contact the commission about the issue, adding that the US might still make adjustments after Europe, China and Canada all registered objections to the reporting requirement.
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