A US law meant to snuff out billions of dollars in offshore tax evasion has drawn the criticism of the world's banks and business people, who dismiss it as imperialist and "the neutron bomb of the global financial system."The unusually broad regulation, known as FATCA, or the Foreign Account Tax Compliance Act, makes the world's financial institutions an extension of the tax-collecting Internal Revenue Service something no other country does for its tax regime.Conceived as a way to enlist the world in a crackdown on wealthy Americans evading tax, it gives global financial institutions and investment entities a choice: either collect and turn over data on US clients with accounts of at least $50,000, or withhold 30 percent of the interest, dividend and investment payments due those clients and send the money to the IRS.Foreign institutions and entities that refuse, or fail, to do so face bills for the taxes due, a draconian penalty of 40 percent of the amount in question and heightened IRS scrutiny. “FATCA is a blunt instrument for which foreign banks have no choice but to each spend tens of millions of dollars to help the US enforce its own tax law,” said Scott Michel, a tax lawyer at Caplin & Drysdale in Washington, D.C.A senior American finance executive at the Hong Kong branch of a major investment house told Michel that FATCA was “America's most imperialist act since it invaded the Philippine Islands in 1899”." The regulation, Michel said, was “engendering a profound and growing anti-American sentiment abroad”.Dean Marsan, a tax lawyer and former senior tax counsel at Lehman Brothers who has written extensively on FATCA, called the rule “a US-centric law for the world’.The legislation that created FATCA was introduced in 2009 by four congressmen during a crackdown on UBS, the Swiss bank giant that sold tax evasion services. Signed into law by US President Barack Obama in March 2010, FATCA takes effect on January 1, 2014, for most transactions and a year later for other payments.The phase-in, announced in April, already represents a backtracking by the US Treasury Department amid criticism from foreign banks about FATCA's reach, costs and still-to-be-ironed-out points. It originally had planned a January 1, 2013, start date.In June, the private banking arm of HSBC said it would stop offering services to US residents outside the US because of the cost of complying with the rule. That month, Michael Ambuehl, Switzerland's secretary of state for international tax and financial matters, told a conference in Zurich that FATCA showed that "Switzerland is becoming a target of intense international greediness”.Even the European Commission has objected, and experts say other countries may create their own FATCA-style regimes for US banks or withdraw from U.S. capital markets.In a barrage of letters to the Treasury, IRS and Congress, opponents from Australia to Switzerland to Hong Kong assail FATCA's application to a broad swath of institutions and entities. Those affected include commercial, private and investment banks and shells and trusts; broker-dealers; insurers; mutual, hedge and private-equity funds; domiciliary companies; limited liability companies, partnerships; and other intermediaries and withholding agents. FATCA also covers affiliates of the entities.Foreign banks object to the rule’s applicability to financial instruments including bearer bonds and payments which "pass through" securitisation pools, a component of syndicated loans.Tax lawyers at the Swiss-American Chamber of Commerce in Zurich called FATCA "the neutron bomb of the global economic system" for what they argued would deter foreign investment in US securities. Reuters