Hong Kong Rejects U.S. Compliance Law, Ireland Embraces It

Published December 13, 2012

The chief executive of Hong Kong’s Securities and Futures Commission is warning against allowing U.S. and European financial regulation in Asia, according to the Global Legal Post, an international legal media publication.

Meanwhile, Ireland recently became one of the first countries in the world to agree to the U.S. Foreign Account Tax Compliance Act (FATCA), one of the laws that so bothers Hong Kong Securities and Futures Commission CEO Ashley Alder.

According to the Global Legal Post, Alder told delegates to the Thomson-Reuters Pan-Asian Summit in Hong Kong: “If Asia does not get properly involved in the global regulatory agenda, we will find that the U.S. and European rules will be extended to us whether we like it or not.”

‘Conscripting Foreign Banks’

Andrew Quinlan, president of the Center for Freedom and Prosperity, calls FATCA “an effort by the U.S. to conscript foreign banks as agents for the IRS, and to have them pay for the pleasure.”

The Internal Revenue Service Web site says of FATCA, “Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season.

“In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.”

‘U.S. Citizens Taking a Hit’

In a November 29 speech at the Caribbean Central American Action’s 36th Annual Conference on the Caribbean and Central America in New Orleans, Quinlan said, “Not only are burdens being placed on foreign institutions, but U.S. citizens are taking a hit as well. Americans living overseas are being dropped from their banks, which are also in some cases eliminating their U.S. holdings.

“At the time it was passed, the government estimated that FATCA would raise around $8 billion over ten years,” Quinlan added. “That’s almost enough to pay for a single day of spending by the federal government at current levels. Almost. . . . So to provide enough money to fund the U.S. government for less than a single day, the entire world is expected to bear the significant burdens of this law.”

Ken Owens, former chairman of the Irish Funds Industry Association, said in a statement, “By concluding the negotiations on a Model 1 Intergovernmental Agreement between Ireland and the U.S., Revenue has given the Irish Financial Services industry a significant advantage in their quest to comply with FATCA. Irish financial institutions can now avoid the need to enter an agreement with the IRS and instead can report directly to the Irish Revenue authorities.”