The Federation of Thai Capital Market Organizations (Fetco) has asked the Finance Ministry to have the Thai government set national measures to deal of the US Foreign Account Tax Compliance Act (Fatca), which will take effect in 2014, to make the process less complicated.
Fetco wants the government to set up a central organisation to collect and transfer withholding tax penalties and report them to the US Internal Revenue Service (IRS), preparing a legal amendment following Fatca enforcement and facilitating institutional compliance.
Fatca is an attempt by US officials to prevent tax evasion by hiding assets offshore.
Under it, foreign financial institutions and US taxpayers with foreign financial assets that exceed certain thresholds must report them to the IRS. US taxpayers use Form 8938.
Foreign financial institutions must report directly to the IRS information about financial accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest.
Fetco chairman Paiboon Nalinthrangkurn said if foreign financial institutions refuse to cooperate with Fatca, they will be charged a 30% withholding tax on US-dollar transactions.
Mr Paiboon said Fetco consulted with the Securities and Exchange Commission, the Stock Exchange of Thailand, the Association of Investment Management Companies, the Association of Securities Companies and the Thai Bankers' Association before submitting its proposal to the Finance Ministry.
Commercial banks, asset management firms, securities businesses and insurance companies are all liable to follow Fatca's requirements.
He wants Thailand to sign an agreement with the US government to set up a working system and hire lawyers as consultants.
"Fatca will have a massive effect on money markets, capital markets and insurance companies, and it could sway foreign confidence," said Mr Paiboon.
"The most important facet is the withholding tax penalty, which should be effective by early 2015, so the government must quickly address the subject. We hope the Finance Ministry and the government will recognise the importance of this issue."
Several European countries including the UK recently signed cooperation agreements with the US government on this law.
The impact has already started to reverberate in Thailand, with both Kasikorn Asset Management and TMB Asset Management deciding not to offer their mutual funds to Americans.
About the author
- Writer: Nuntawun Polkuamdee
Position: Business Reporter