At a seminar for financial services professionals on the island on June 19, Peter Philips, the Minister of Finance and Planning, said the government was talking to the US about the implications of FATCA for Jamaica.
“Even as we make our efforts, whether on the basis of bilateral interventions with the United States, or in partnership with other Caribbean countries, we will be strenuously seeking to ensure that there is no unfair advantage faced by Jamaican financial institutions,” Philips said. “If an agreement proves possible, the financial entities will be relieved of some liabilities particularly if reporting is done through the local central authorities who would be empowered to receive this information.”
When the Treasury and Internal Revenue Service (IRS) published proposed final regulations for FATCA in February, they also released a joint statement with Germany, France, Italy, Spain and the UK about the possibility of establishing bilateral agreements to implement the legislation that requires so-called foreign financial institutions (FFI) to tell the US government about their US accountholders. Part of the motivation for the agreements is to get around the rules in some jurisdictions that prohibit the reporting of information to foreign authorities. The original legislation called for direct reporting by FFIs to the IRS.
Ensuring compliance
Jamaican financial institutions could not ignore FATCA, Philips said, because of the 30% withholding tax that would be imposed for non-compliance, though there were risks, such as legal risks relating to the unauthorised disclosure of customer information and to withholding and or closing customers’ accounts; operational costs and risks, relating to retrospective and additional due diligence and data transmission measures; and risks related to the withholding on a foreign financial institution’s US income payments and possible closure of that foreign financial institution’s US accounts.
The Jamaican government will unveil several measures soon to help institutions prepare for FATCA’s implementation in 2013, Philips said. For example, the Bank of Jamaica will carry out a risk assessment on its licensees to see if they and their systems are ready.
The minister said that the FATCA legislation was a sign that the global regime of tax compliance was only going to get tougher and that Jamaica needed to make sure that it had the right processes in place to deal with that. Financial authorities around the world have determined that “tax havens or the possibility of avoiding paying tax in a jurisdiction ought to be eliminated”.
More agreements
One of the delegates at International Tax Review’s first tax & transparency forum in London last month said it was his understanding that at least 48 jurisdictions were talking to the US about bilateral agreements to implement FATCA. However the Treasury refused to confirm any number to International Tax Review. That conference was almost two months ago. The number will surely be higher now.
Manal Corwin, deputy assistant secretary for international tax affairs at the Treasury, told a conference in Washington earlier this month that the US government was aiming to conclude agreements with the five countries that were party to the February statement by the end of next week. He said the same timescale was envisaged for producing a model agreement for use by other jurisdictions.
