A look at what’s on International Treasurer’s radar screen this week.
This week’s developing issues come courtesy of the NeuGroup’s annual Advisory Board conference call. The NeuGroup Advisory Board is made up of treasurers, bankers and academics and others who currently have an active role in corporate finance.
Some of the many subjects discussed included how many treasurers don’t realize the work needed to prepare for Dodd-Frank, how the hunt for real-time data continues, getting better access to cash in China as well as the tax issues related to the IRS’s efforts to tax overseas cash and earnings.
Dodd-Frank prep. Although there are many issues that need to be resolved ahead of Dodd-Frank, one misconception is that the end-user exemption is automatic. However, beyond the required board approval to pursue the exemption, companies must submit possibly reams of information to the SEC and the CFTC regarding how it expects to meet financial obligations associated with using security-based swaps. They will likely have to provide a credit support agreement or a written third-party guarantee. Counterparties also have to submit information to the regulatory agencies. Whatever the final outcome of the rules, it could mean more work for corporate treasury.
Gathering real-time information. Technology will continue to play a big role gathering data from around the globe, particularly as it relates to exposures, commodity and otherwise. Companies still face the challenge of pulling all that data together from around the world. And they still seek that “magic bullet” when it comes to off-the-shelf systems but so far they often rely on a mix of systems created in-house and external solutions.
Banks could play a big role here as well, as they try to do what they can to tease out more corporate cash. A recent bank survey from Aite Group showed that corporate banking is the area seeing the most IT investment over the next several years.
China cash. Many companies are planning for significant growth in China, which likely means lots of cash generation; and several members of the Advisory Board mentioned managing cash there as increasingly challenging. One member, in discussing “keeping available liquidity available in the right places” discussed how at his company there is a question of whether leaving cash in China is optimal. “You keep it there for a nice yield pick-up but getting it out is difficult; it’s not a one-day exercise.”
Another member echoed that sentiment. He said US companies still worry about how they will enter China and set up business, but ultimately how cash can be extracted from the country once business is up running is rising to the top of the list of concerns.
FATCA and FBAR and other tax issues. The IRS is gearing up for keeping track of US taxpayers – individual and corporate – overseas with the Foreign Account Tax Compliance Act (FATCA). This is a subject IT has covered before (see related story here) and has to do with foreign financial institutions being required to form US withholding tax agreements with the IRS and to enforce account holder verification and due diligence processes. If the foreign financial institution does not comply and is unable to produce a withholding agreement with the IRS will be subject to a 30 percent withholding tax.
FBAR or Report of Foreign Bank and Financial Accounts, is also on treasurers’ radar screens. IT also covered FBAR briefly in early May (see related story here), but nonetheless it is still an issue (of uncertainty) for many treasurers. FBAR is part of the 1970 Bank Secrecy Act and requires any US person having a financial interest in, or signature or other authority over, a foreign financial account, including bank or brokerage accounts, mutual funds, trusts, or other type of foreign financial account.
Meanwhile China is reportedly adopting US tax almost verbatim, including rules governing transfer pricing. This at the same time US tax authorities are trying to tighten transfer pricing rules. “The IRS thinks transfer pricing rules are ineffective at picking up the appropriate level of income,” suggested one advisory board member.