Financial website iExpats reports the Republicans are pushing to can FATCA (Foreign Account and Tax Compliance ACT), a far-reaching piece of legislation affecting the financial industry around the world, including New Zealand.

According to the website, the Republican National Committee is drafting a resolution to be put to Congress calling for the repeal of the controversial law.

“This is unfair on Americans. The law treats them as criminals and violates their right to privacy,” a party spokesman is quoted as saying.

The Republicans also claim the law has caused many foreign banks and financial institutions to turn away American customers.

FATCA, which comes into full effect next July, is an anti-tax avoidance measure targeting Americans with funds overseas, including American citizens who live in other countries.

Organisations that aren’t FATCA-compliant will have 30% of any funds invested in America from overseas withheld by the IRS (Inland Revenue Service).

The New Zealand Bankers Association initially estimated it would cost $100 million for New Zealand banks to comply with the rules, although the cost may be reduced by a proposed inter-governmental agreement with the US.

This agreement would allow New Zealand financial services providers affected by FATCA to deal directly with Inland Revenue rather than the IRS.

Regardless of the Republicans’ planned resolution, the law will kick in next year.  However, it raises the prospect it might be scrapped in future, particularly if there is a Republican President.
Financial adviser Murray Weatherston says advisers are unlikely to be jumping for joy at the FATCA news.

“I’ve got to say I haven’t even got to turning my mind to FATCA.  There are so many things that are immediate, that have an impact today and tomorrow that I don’t worry about those things that are miles out.”