Lebanon Businessnews News

which tax law to rule?
A new global tax information
law is expected by 2016
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The US Foreign Account Tax Compliance Act (FATCA) could be eventually expanded into a more global tax information sharing agreement between countries. This international act is called ‘Global Account Tax Compliance Act’ (GATCA).

FATCA aims at preventing tax abuse by US persons living abroad and requires foreign financial institutions to identify and provide information on US clients with accounts outside the US.

Local banks have not yet received any official notification about GATCA and are in a wait-and-see situation. “The law is still in the negotiation phase. We still know nothing about the law’s rules, any requirements to be implied on banks by the Central Bank (BDL), or if there would be only recommendations by BDL to abide by this law,” said Nathalie Dagher, Head of Legal and Compliance Department at FFA Private Bank. “If there would be risk on the relationship between correspondent banks, as it was the case with FATCA, banks would then be forced to fully abide by GATCA,” she said.

“GATCA is not intended to end FATCA, but there is an international trend to exchange banking information to improve tax disclosure and collection worldwide,” said Wissam Fattouh, Secretary General of the Union of Arab Banks (UAB).

“Lebanese banks will not face big difficulties in applying GATCA as they have already finished a great part of applying FATCA, including IT programs and know your customer measures,” said Fattouh. He said that “Lebanon has an interest in applying GATCA as the Lebanese diaspora is big abroad and it may benefit from more tax revenues. However, the country needs to have changes in the local tax system to proceed.”

Although GATCA would be useful for the banking system and the country’s reputation, Dagher acknowledged that “applying this law would incur more high costs for banks.” She said that “each bank will try to adapt to these costs according to its size as with the FATCA measures.”

European Union countries are the best candidates to apply GATCA. According to Fattouh, the US has succeeded in applying FATCA because 60 percent to 65 percent of international trade is carried out in US dollars. He said that 27 percent to 30 percent of international trade is in euro, “Which will make it easier to apply GATCA.” He said that other countries will follow in the application of this law like Canada, China, and Brazil among others.

Fattouh expected GATCA to be ready by September 2016. He said that the Organization for Economic Co-operation and Development (OECD) has already put the mechanism to ease tax information exchange globally. “The infrastructure is ready and the law is expected by next year,” he said.
Reported by Leila Rahbani
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Date Posted: Nov 05, 2015