I believe Eric may have already touched upon this but it appears as if it has now been picked up by Reuters.
http://www.reuters.com/article/2012/11/28/us-asia-regulation-china-idUSBRE8AR0N720121128
It may be worthwhile for those of you in touche with Kevin Shoom to forward this article to him.
“China’s banking and tax laws and regulations do not allow Chinese financial institutions to comply with FATCA directly.” Liu said. He emphasized those were his views and not necessarily the opinions of the central bank or the Chinese government.
The law will only slightly increase U.S. tax revenues, Liu said. “One estimate says FATCA covers less than 2 percent of U.S. tax payers and would bring extra revenue of only $8bln over 10 years, he said.”
Liu was giving a speech on the foreign impact of financial regulation. He also noted the challenges posed to foreign banks by some of the regulation contained in the U.S. Dodd-Frank Act, such as the Volcker Rule. The rule bans banks from engaging in proprietary trading and will apply to many foreign banks if they have a branch in the U.S.
“The Volcker Rule seems to be intentionally designed to apply to a broad range of foreign institutions in order to level the playing field for U.S. entities subject to the rule.”
I don’t understand why China feels pressured to comply. They have an even bigger stick than the 30% withholding the US is using: the threat of not lending to the US anymore.
@Christophe
I don’t think they do. I think (and hope) China will tell Washington where they (we) can stick FATCA. Note: ‘“In the judicial area, there should be better respect for other countries’ laws and sovereignty concerns and cross-border judicial actions should be taken in accordance with [international] principles. A multilateral regime should be developed to facilitate cross-border judicial actions,” he said.’
Too bad no one from Ottawa has the gumption to take the same position. Maybe a split will develop between the usual satellites (starting with Europe) and the BRICS.
@Eric.
Thanks for the “real” translation. I had seen this story earlier, but the google translate was not nearly as good! It is great that you continue to be the voice from the East with your insights as to how this all is being viewed in China.
*it is not about collect tax, it is about fines to foreign bank as it is impossible for them to comply especially the rules is a moving target. The US government discover a new revenue stream, they make up the rules so you have to pay.
China handing over information to the US and paying for the honor of doing it? Yea, never gonna happen. Furthermore, all inflows and outflows must, by law, pass through SAFE, which is the PBoC. PBoC does not keep personal or business accounts and is a government central bank. Therefore, it is exempt. All branches of all consumer banking in China are legally separate entities with separate systems. The US can sanction them all they want, but it’s pointless. All funds travel through SAFE and as such are exempt.
Hilariously however, China could easily make a similar demand for information to the US on all residents which China considers to be Chinese in an effort to stop an outflow of illicit funds. With a policy of full seizure of all funds from non-compliant banks and financial institutions. As the US has a system which allows for simple name changes, it’s the only way to be sure! As such, under this theoretical policy, all US banks are required to comply and install tracking software systems developed by the Chinese government, which are available under license at their own expense. All funds directed to non-compliant banks will be seized, all funds originating from non-compliant banks will be seized. In order to be compliant, all banking customers will be required to provide evidence of non-Chinese birth as well as direct family relations and their origin of birth. Previous status, current status as well as the eligibility to claim Chinese citizenship in the future will be considered. Furthermore, full accounting will be required of assets which may have originated from China. By hypothetical Chinese law, all flagged assets will be required to be frozen until fully investigated by Chinese authorities.
What’s wrong America? Don’t you want to help fight corruption in China?
@Dan,
Thanks for your ironic humor…
But of course, America wants to comply with China needs. That is why the International Revenue Service is imposing DATCA so the framework can be in place to do just what you suggest! LOL