McGill to speak at New Fund Forum 2010 in Monaco
Ross McGill will be making a presentation in Monaco on June 30th. The three day conference brings together professional from the fund industry and Mr McGill will be providing insights into the withholding tax landscape and how fund managers and their financial intermediaries can ensure a maximum return on investments through efficient withholding tax recovery.
Ross McGill appointed to CESAME 2 Subgroup on fiscal issues
After the adoption of the EU Commission recommendations on withholding tax relief in October 2009, which in turn followed the work of the FISCO group, the CESAME 2 workgroup has created a sub-group of market experts to consider and follow up on the recommendations from a business perspective.
Ross McGill contributed to the last FISCO meeting and has subsequently been asked to contribute to the work of the CESAME 2 sub-group.
“Ever since I joined the industry in 1996, I have had an almost evangelical passion to make withholding tax a simpler thing for investors to understand and for the industry to implement. I already sit on the ISO 20022 Securities Evaluation Group and have tried, through my three books on the subject, to try to help everyone understand the complexities involved in the current procedures and treaties. With many EU markets now being referred to the European Court of Justice on these matters, its clear that withholding tax is firmly in the top quartile of custody issues. So, I’m honoured to have been asked to join this group and delighted to be able to contribute in however small a way, to helping investors maximise their returns in an efficient way.”
Upcoming Course…
Our next specialist training course will be:
A 2-day intensive course covering the global basics of withholding tax, key operational problems and solutions for intermediaries. The course is led by industry expert, Ross McGill.
| Location: Amsterdam
Date: 22nd – 23rd June 2010 Cost: £975 per delegate. |
 |
NEW! |
If you are unable to be in Amsterdam, you can still benefit from this course by attending online at a reduced price of £400 per delegate. |
If you attend online you will get the same high-quality training via a live video stream and the facilities to ask questions in real time, participate in group discussions and benefit from interactive workshop tasks.
NEW! |
We are also happy to provide substantial discounts to firms that book multiple delegates. Please email us at info@tconsult-ltd.com for details. |
“Withholding Tax is changing at a more rapid pace today than it has ever done before. Changes in the US market, as well as changes in the OECD markets and the European Union mean that the complexity associated with processing withholding tax has never been greater. This course goes into detail not only as to the context of each of these changes, but also the practical implications for custodian banks, brokers, beneficial owners and everyone else in the investment chain, thus ensuring that withholding tax is optimised for clients.”
Ross McGill, Course Presenter
The course will be beneficial for senior departmental heads responsible for deciding strategy and resourcing in corporate actions, including anyone responsible for compliance, risk management, client relationship management, client service strategy, fund or asset management, institutional investment and heads of back office operations. Its objective is to give enough operational and regulatory detail to allow senior managers to understand the options open to them for providing withholding tax services within custodial SLAs and the tools to select the most appropriate solution.
Note: This is NOT a course for withholding tax departmental staff. It is a course designed to give senior management the tools they need to decide and develop strategy.
US Tax Policy – The Perfect Storm?
Never, in thirteen years in this industry, would I have predicted that a US President would talk about withholding tax and use the term “QI” (qualified intermediary) in a public forum, let alone formally target foreign banks and inward investors, as well his own residents with dramatic changes to tax policy that could create a “perfect storm” for the US as an investment market.
Yet, since September 2008 there has been a steadily rising tide of concern, not to say aggravation, over the policy proposals by the US administration, together with the more procedural consequences of the IRS and US Treasury’s proposed changes to the enforcement of that policy. The result we are seeing may have significant, if unintended, consequences. Already, many non-US banks are writing to their US customers telling them to close their accounts and take their money elsewhere (where I wonder?). Others, predominantly the majority of financial firms who have not so far signed up to the QI program, are having to review a massive increase in expenditure for little or no benefit, in order to comply with the potential new rules. Many of the small and medium sized firms I’ve spoken to are actively considering divesting from the US, whether or not they have US customers, simply because the cost of providing asset servicing for the US market is viewed as prohibitive.
To consider the effects of this “perfect storm” we have to look at the way the elements are coming together. President Obama’s remarks in May this year came hard on the heels of swingeing proposals from the IRS to tighten up on the terms of the QI contract and also proposals from the US Treasury to more than double the penalties that would be applied to foreign banks for non compliance. The fact that the IRS intends to employ over 800 more enforcement staff and the US Treasury predicts penalty revenue to increase to over $300 million by 2018, is giving the community serious cause for concern. All this now puts the UBS case in perspective with the US and Switzerland battling it out over disclosure and France, Belgium and other markets adopting new “information sharing” principles, all of which sit at the heart of withholding tax.
The problem for US tax policy here is that the two main planks of the strategy – the use of the QI tax model and the underlying strength of the US economy are both fundamentally flawed individually and in concert. The QI program has not gained sufficient traction (or successful compliance) in the eight years since its inception, with only a small percentage of firms globally, usually the larger ones, having the financial resource to become and maintain QI status. This is partly due to a lack of constructive engagement with the community at a global level. The problem is compounded by the facts that the policy doesn’t take account of the simple reality that, for foreign financial institutions, the number of US customers (and the value of their assets) is relatively inconsequential to their overall client base and that the trigger for compliance is receipt of US sourced income, not that of simply having US customers. This means that, even though US tax policy is ostensibly aimed at US residents and their compliance, or lack thereof, the unintended consequence of using the QI regulations at this level, is that all investors in US, as well as their intermediaries, of any flavour, are impacted potentially to the tipping point.
All this would be moot, as it was in 2001 when the regulations were implemented, if it were not for the fact that today, the US economy can ill afford a mass exodus of foreign investor’s cash and has competitors waiting in the wings. And yet, that seems to be the road that US tax policy is sending the community down by targeting foreign financial institutions as well as their customers. As the industry meets in Hong Kong for its annual SIBOS conference, it’ll be exactly a year to the day that Lehman Brothers hit the headlines around the world and sparked the largest and deepest global recession for many years. Today, we know that China, India and all the Asia/Pac markets are coming out of recession faster, are more nimble and can spot the opportunity to draw inward investment away from the US more easily. I’ve heard in several markets that people can clearly see the tipping point on the horizon now. The problem is that, if such a tipping point does occur to any significant extent, the consequences may be much larger and longer lasting than any of us think. The reality is that in tax policy, we need balance and certainty not radical swings that create uncertainty for investors and hard pressed banks.
It’s seldom mentioned of course, but withholding tax is actually a key driver for the global economy. For every dollar taxed at a treaty rate or refunded to an investor after the fact, there are hundreds of thousands of dollars that enter the market concerned, precisely because of the availability of those refunds and the certainty that the treaties deliver. It would therefore seem more prudent to assess the available policy tools from both a principle and practical standpoint, engage with the community on the receiving end more extensively and constructively and make sure that the community is an early adopter of policy rather than an enemy to be defeated.
To that end, it’s perhaps fortuitous that we all meet again, one year on, in the shadow of this perfect storm, at the centre of the Asian markets – at SIBOS, where the SWIFT community can reflect on a year of turmoil of one kind and try to make sure we don’t end up in turmoil of an entirely different kind.
For those who are interested, I’ll be speaking at an Open Theatre Presentation at SIBOS on this very issue on Tuesday September 15th. You can also see other key market figure’s views at the Linkedin Withholding Tax Group. For those of you returning to Europe after SIBOS, the two-day Withholding Tax Congress in London organised by Osney Media will be solely focused on this issue and will be a “must attend” event for tax, compliance and operations staff. Finally, at the risk of blatant self-promotion, you can also get a broader view of this issue in my latest book “Investment Withholding Tax – Best Practice & Strategies for Intermediaries and Investors” published by Palgrave Macmillan in their Finance & Capital Markets series. You can’t say no-one told you!
