As part of a continuing focus on the tax issues impacting the asset management industry, International Tax Review brings you the second edition of the Financial Services supplement publication.
Over the past 12 months, when the first edition was published (replacing the longstanding annual publication on capital markets tax developments), much has happened in the area of financial services taxation. We are now approaching the first anniversary of the implementation of the US Foreign Account Tax Compliance Act (FATCA), for example, and firms are continuing to size up their own requirements with a view to increasing compliance and reporting efficiencies on a platform that will stand up in the long term.
One trend identified in 2014 – gaining extra revenues from the financial sector through bank levies – has continued. Some authorities, notably the UK government, have engaged in a touch of mission creep, with 2015 seeing further gradual hikes to bank levy rates.
However, governments may need to resist the temptation to continue looking at such levies as an easy revenue-raiser, or at least curb rate rises, as the financial sector begins to kick back. In the UK specifically, where the bank levy rate has been raised eight times since its inception – most recently to 0.21% in the March Budget – HSBC and Standard Chartered are among those considering the viability of relocating away from the London financial centre in favour of Asia. After HSBC announced it was undertaking a review of its headquarter location, the bank's share price rose, suggesting that shareholders would support a relocation.
Progress on the proposed financial transaction tax in Europe (EU FTT) has stalled, meanwhile, with recent meetings of the 11 participating member states characterised by wrangling over revenue collection (both volume and processes) and over which trades to tax. However, the rhetoric of Pierre Moscovici, European tax commissioner, remains upbeat, so taxpayers should expect further announcements in the coming months.
And while relatively new structures and mechanisms like the exchange-traded fund (ETF) continue to grow, the associated tax and regulatory challenges must not be overlooked. The main tax challenges for ETFs, and other asset management vehicles, stem from the proposals in the OECD's BEPS project, increased investor reporting in general, and the proposed EU FTT.
We hope that this guide will help you to effectively manage such challenges, along with your other financial services tax issues.
Editor, International Tax Review