09/02/2012 Author: Will Wainewright

KPMG: Fatca draft could reduce costs by $10bn

The draft Fatca regulations put forward by the US Internal Revenue Service (IRS) yesterday could reduce implementation costs by $10bn, according to KPMG.

The Foreign Account Tax Compliance Act, designed to cut down on US tax evasion, will require financial institutions outside America including hedge funds to disclose more information to the IRS.

“Reactions to yesterday’s draft Fatca papers will be mixed,” said Adrian Harkin, KPMG’s global head on Fatca. “On the one hand, the IRS has done a good job in listening to the financial services industry and has tightened the scope of Fatca, making the proposals more proportionate.  We estimate that these measures could reduce the implementation cost of Fatca by more than $10bn.”

He continued: “On the other hand, FATCA will still cost the industry much more than it is likely to raise for the IRS. Plus, the introduction of bilateral FATCA agreements between countries will add more complexity into the mix for the biggest global financial institutions.”

Julian Korek, founder at compliance firm Kinetic Partners, focused on Fatca’s likely impact in this week’s issue. Next week’s HFMWeek will feature all the reaction to the IRS’s latest draft.