Six Asian investment industry associations have joined forces in an unprecedented joint action to fight off overreaching tax rules emanating from the United States.
Although the industry bodies do have regularly scheduled contact, this is the first time they have coordinated a mutual response to regulation, in this case the proposed Foreign Account Tax Compliance Act (Fatca), notes Sally Wong, CEO of the Hong Kong Investment Funds Association.
This sets an important precedent because one of the weaknesses of doing business in Asia has been the fragmented nature of its voice.
Of course, investment groups are influenced by the same global companies, and do not represent governments. But it does show that a common industry voice can be found to push the same agenda among Asian jurisdictions.
But whether it spurs Asian regulators to find a common platform to negotiate US or European regulation has yet to be seen.
The six are: Association of Mutual Funds in India, Federation of Investment Managers (Malaysia), Financial Services Council (Australia), Hong Kong Investment Funds Association, Investment Management Association of Singapore and Securities Investment Trust & Consulting Association (Taiwan).
The investment industry associations have submitted a comment to Timothy Geithner, US Treasury secretary, and Douglas Schulman, commissioner of the Internal Revenue Service, opposing Fatca and calling for its repeal.
“Fatca is an attempt by the US to unilaterally super-impose its tax system – arguably the most complex regime in the world – on all of the world’s financial institutions,” says the joint submission.
The system is too complex to be practicable and the costs will fall on end-investors and retirement scheme members worldwide, the six argue.
It also sets outrageously high compliance costs on financial institutions, contravenes local data privacy laws, forces changes to global payment systems, and imposes an English-language demand on local institutions and regulators. Further, it will reduce investment choices for US investors and corporate borrowers abroad.
The associations call for Fatca to exempt national retirement and providential schemes, or at least delay implementation until 2017.
Paul Schott Stevens, president and CEO of Washington, DC-based Investment Company Institute, says the organisation has been in touch with Asia-based peers on this issue. He agrees that more time is required to implement Fatca; that documentation required of financial institutions needs to be relaxed and made more cognizant of its costs; exemptions should be widened to include, for example, retirement accounts; and that time and encouragement should be granted by the US government to enable bilateral agreements with regard to tax evasion so as to respect other countries' rules on data privacy and other sensitive provisions.
"We're encouraged to see the industry in Asia work with a collective voice," he says.