US should show more respect over Fatca – China official

The unilateral approach taken by the US to combat tax evasion is not the right one, says senior figure at the People’s Bank of China

The US should employ better respect for other countries’ sovereignty with regard to implementing extraterritorial measures such as the Foreign Account Tax Compliance Act (Fatca), which is unlikely to lead to a global solution to combat tax evasion, according to the deputy director general in the legal affairs department at the People’s Bank of China (PBoC).

Earlier this month the US’s Internal Revenue Service released a list of 50 countries that are negotiating intergovernmental agreements for sharing information under Fatca, which China was noticeably absent from.

And speaking in a personal capacity at the Thomson Reuters Pan-Asian Regulatory Summit in Hong Kong, Liu Xiangmin gave no indication the Chinese government was looking to sign such a deal.

Instead he highlighted the extraterritorial issues surrounding the US law aimed at combating tax evasion by US citizens.

“I agree that countering tax evasion is an important policy bill but an unco-ordinated extraterritorial measure such as Fatca is unlikely to generate broadly accepted solutions with full consideration of the effects on global financial systems and the conflicts involved,” he said.

Liu called for an internationally co-ordinated solution rather than the US’s unilateral stance to tackle tax evasion.

“A more co-ordinated multilateral approach should eventually replace the unilateral approach of Fatca. Efforts should focus on finding reasonable precautions and balanced solutions preventing international tax evasion and to minimise conflicts with foreign laws and regulations,” he said.

Liu said there must be co-ordination both in cross-border judicial decisions and between regulatory regimes.

“In the judicial area, there should be better respect for other countries’ laws and sovereignty concerns and cross-border judicial actions should be taken in accordance with [international] principles. A multilateral regime should be developed to facilitate cross-border judicial actions,” he said.

 

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