EU Politicians Step Up Pressure for U.S. FATCA Reciprocity

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By Joe Kirwin

European politicians are looking to force U.S. banks to exchange tax data with governments within the 28-nation bloc.

With frustration mounting because the U.S. hasn’t adopted the OECD’s common reporting standard, members of the European Parliament asked the European Commission to propose a mandate to negotiate an accord with the U.S. to make the Foreign Account Tax Compliance Act reciprocal to ensure a two-way data exchange.

At a May 4 hearing by the Parliament’s special Panama Papers Investigative Committee, numerous parliamentarians called on the EU executive body to ensure reciprocity when it comes to FATCA.

Ludek Niedermayer, a parliamentarian from the Czech Republic, told EU Taxation Commissioner Pierre Moscovici that the commission “should propose a mandate to negotiate an reciprocal FATCA arrangement.”

Jeppe Kofod, co-rapporteur of the Panama Papers committee, told Bloomberg BNA that in “the fight against money laundering and tax evasion, international cooperation and exchange of information is where it starts and ends. Therefore, I support that the commission propose a mandate to call on the U.S. to make FATCA reciprocal.”

Money Flow Concerns

The demands from the members of Parliament come as concerns mount that money-flows to the U.S. from Europe are increasing as the first tax data exchanges under the OECD CRS are taking place in 2017 and the lack of FATCA reciprocity is putting European banks at a competitive disadvantage.

“While banks in Europe have made significant investments to implement the CRS and FATCA, the same does not hold true for banks in the U.S.,” Camille Seilles, a legal and tax adviser with the Luxembourg Bankers Association (ABBL), told Bloomberg BNA in an email statement. “This triggers a distortion in terms of regulatory costs and puts a strain on the achievement of a global level playing field regarding tax transparency.”

The ABBL includes all of the leading banks in Europe, including German-based Deutsche Bank AG, French-based Societe General S.A.. and Swedish-based Nordea AB.

Long-Term Commitment

Members of the European Parliament as well as European bank officials are quick to note that the intergovernmental agreements signed by EU countries earlier in the decade with the U.S. to comply with FATCA call for, in the long term, a reciprocal arrangement for data exchange.

Moscovici was measured in his response about how the EU executive body would deal with the U.S.

“It is no secret that the EU wants reciprocity along with OECD CRS,” Moscovici told members of the European Parliament. “We have raised the issue, including during meetings I had in Washington last week. The U.S. has a central role to play in the fight against tax avoidance. We will have to see how the new U.S. administration moves.”

EU Tax Haven Blacklist

The issue of U.S. compliance with the CRS is crucial as the EU closes in on a tax haven blacklist due to be finalized at the end of 2017. Currently, 92 countries or jurisdictions are being screened for possible listing, including the U.S. A key criteria for finalizing the list is compliance with the CRS as well as the Organization for Economic Cooperation and Development’s plan to combat base erosion and profit shifting.

“If the U.S. doesn’t live up to the EU tax haven blacklist criteria, they should obviously be added to the list,” said Kofod, a Danish member of the Socialist and Democrat political group, which is the second largest in the European Parliament.

Seilles said “inclusion of the U.S. on the anticipated EU list of uncooperative jurisdictions would certainly constitute a strong political signal. Whether this would effectively lead the U.S. to grant a high level of reciprocity under FATCA or to implement the CRS remains to be seen, however. A consistent and coordinated approach on the part EU member states is a must on this question.”

Money Laundering

The demands raised by European Parliament members came a day after the institution’s Committee for Economic and Monetary Affairs rejected, for the second time, a European Commission blacklist of countries it is required to draw up under the EU Anti-Money Laundering Directive. Parliament members want the European Commission to include financial offshore centers such as those in the Caribbean, and in the Channel Islands in the English Channel.

Instead, the European Commission list contains 11 countries, including Afghanistan, Iraq, Bosnia and Herzegovina and Syria. After the first European Parliament rejection, the commission dropped Guyana and added Ethiopia. The European Parliament’s full plenary is due to vote on the issue later in June, and if more than half of the 751 members vote against it, the commission will be required to draw up a third blacklist.

“The commission’s process was not sufficiently autonomous and the criteria for its list excluded offenses giving rise to money laundering such as tax crimes,” the European Parliament committee panel said in a May 3 statement.

The commission insists that the list only concerns countries involved in money laundering, especially for terrorist offenses, and does not include tax evasion as a criteria.

The EU tax haven blacklist—separate from the money laundering list, and due to be finalized by the end of 2017—concerns issues related to tax evasion, according to the commission.

To contact the reporter on this story: Joe Kirwin in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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