New U.S. tax deal seen too costly for small banks
By Lisa Jucca, Reuters
New U.S. tax withholding requirements may force private banks to relinquish their qualified intermediary status or stop doing business with Americans altogether, Swiss bankers said on Thursday.
U.S. tax authorities are in the process of writing a new Qualified Intermediary (QI) agreement and first drafts show the proposed rules may be tougher and more expensive than those in the previous agreement, Swiss bankers say.
“The drafts that have been published lead us to believe that many banks around the world, and not only in Switzerland, will have great reservations,” read a speech by Gregorie Bordier, partner at Swiss private bank Bordier & Cie.
Under the current QI agreement, around 5,000 institutions tax U.S. citizens at source without having to disclose the identity of their clients to the U.S. Internal Revenue Service (IRS), a useful tool for institutions operating in offshore centers such as Switzerland.
Foreign banks must sign up to the QI deal if they want to invest directly in the U.S. market. Bank secrecy stronghold Liechtenstein decided last year to share tax data with the United States for fear of seeing its banks losing QI status.
But a revision of the text, possibly in 2009, may lead to more intrusiveness.
“We cannot rule out that certain small banks may simply give up their QI status,” Bordier’s speech said.
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