September 1, 2014 – By: Thierry Haensenberger, SVP Business Development EMEA
If imitation is the sincerest form of flattery, the US Internal Revenue Service (IRS) has a lot to smile about. However, market participants around the world have less to be happy about as they face up to the reality of complying with the growing number of data exchange initiatives that have been inspired by the IRS’s Foreign Account Tax Compliance Act (FATCA).
FATCA is a challenging piece of regulation, but it is no longer the only show in town. For example, from May 2016, British Overseas Territories and Crown Dependencies, including Jersey, Guernsey and the Cayman Islands, have agreed to share taxpayer data. Even more significantly, finance ministers and central bank governors of G20 countries have committed to implementing a similar automatic exchange of information (AEI) programme from 2017, leveraging standardization work done by the OECD. This initiative has been dubbed GATCA – the Global Account Tax Compliance Act.
As governments across the world reform their strategies for tackling tax evasion, it would be a huge mistake to take a tactical approach to complying with FATCA. In order to keep cost and complexity to a minimum, market participants should use a single solution that can manage FATCA and all of the other new tax data exchange regulations. Using the same platform for all of the regulations will enable financial firms to mutualize their infrastructure, data, teams and operational processes.
With so many variations between the different reporting requirements and so much yet to be finalized, market participants must also choose a solution that provides a high degree of flexibility. They will struggle to cope with the nuances of the different requirements if they use a ‘black box’ solution that imposes a fixed data model on them. This type of product makes the customer dependent on a vendor’s release plans and priorities, which may not reflect their own.
What market participants really need is a solution that uses the data available within their own environment, without pre-processing requirements. They should choose a platform that removes the regulatory logic data pre-processing from IT ‘black box’ developments and provides a tool that can handle this centrally in a flexible, versioned and transparent environment.
Only by choosing such a flexible solution can market participants stay on top of FATCA and all of the similar regulations that are following in its wake.
To discuss this article further, please contact:firstname.lastname@example.org