Open letter opposes tax evasion measures

Industry heads in Luxembourg have raised concerns about a new US tax evasion scheme, which they say will stifle US business abroad.

In an open letter addressed to Ambassador Robert Mandell, four key players in the commercial and financial sector warned that the Foreign Account Tax Compliance Act (Fatca), would make it “more expensive and difficult for US citizens and companies to domicile and undertake business activities outside the US.”

The letter was signed by Amcham president Paul Schonenberg, ALFI director Camille Thommes, ABBL CEO Jean-Jacques Rommes and Association of American Banks in Luxembourg President David Micallef. It urges Mr Mandell to bring their concerns to the attention of the relevant decision-makers in the US government, “so that appropriate actions can be taken.”

Fatca, which will be made law in January 2013, will force all global financial firms to report details to the US tax authority of any clients linked to the US with more than 50,000 US dollars in an account. The legislation aims to tackle off-shore tax evasion and puts responsibility for reporting on both the shoulders of banks and asset managers as well as individuals.

The opponents to the bill raised three issues with the legislation, namely that the reporting requirements are “intrusive” and “uncompensated.”

The annual financial costs of these new measures, which are estimated to reach as high as 100 million USD, will also be out of proportion compared with the potential taxes which can be recovered by the US, according to the letter.

Finally, the opponents argue that similar legislation already in place has made it even harder for US companies, employees and entrepreneurs to obtain loans from banks abroad.

“As it is the stated objective of the current administration to promote increased sales of American products overseas, it makes no sense to undertake actions which create additional impediments and higher costs and which make it more difficult for Americans and American companies to domicile and work abroad,” the letter concludes.

The US embassy to Luxembourg confirmed receipt of the letter. It told wort.lu/en: "The Ambassador welcomes input from industry about Fatca and he and other Embassy staff have already had several conversations with industry on this topic. We are committed to ongoing collaboration with all interested parties as implementation moves forward."