May 2013 Financial News

Jamaica, US to sign agreement on FATCA

May 10, 2013

The Jamaican Government and the United States (US) are expected to sign an agreement by July aimed at endorsing a new hegemony tax act called the Foreign Account Tax Compliance Act (FATCA), which requires local financial institutions to rat out US account holders.

Concurrently, a government working group is seeking to get a number of institutions exempted from FATCA compliance based on their low risk.

"Our intention is to protect our financial institutions by signing the agreement by the end of July this year, have financial institutions registered and assigned ... by mid-October so as to ensure that they will be deemed compliant," said Myrtle Halsall, deputy governor of the Bank of Jamaica (BOJ).

She was addressing a seminar, organised by the Jamaica Institute of Financial Services, on FATCA at the Terra Nova All Suite Hotel in St Andrew yesterday.

The government working group on FATCA comprises Tax Administration Jamaica, the Attorney General's Department, the Financial Services Com-mission, Ministry of Foreign Affairs and the BOJ.

Halsall indicated that signing an inter-governmental agreement with the US on FATCA will facilitate the avoidance of withholding penalties of up to 30 per cent of income from institutions that have a foothold in the US. The US tax authorities will begin the process of withholding in January 2014, she added.

Exemption for some

The deputy governor referenced the Financial Services Com-mission, BOJ, co-operatives and friendly societies as entities which the working group will potentially seek to exempt.

"An exercise to identify entities which can be exempted from compliance with FATCA due to their presentation of low risk to facilitating US tax avoidance and or the charitable nature of their operations is under way," she stated.

FATCA became US law in March 2010 with a tiered implementation date. Proposed regulations were issued in February 2012 with final amendments in January this year. The law is aimed at capturing non-compliant taxpayers who use offshore institutions to conduct business.

FATCA requires financial institutions to provide information on the finances of individuals classified as US persons to the Internal Revenue Service (IRS).

Thus, the law burdens local institutions to disclose US account-holder information rather than US authorities, said Professor Stephen Polak, a senior IRS agent and lecturer at Thomas Jefferson Law School, in his address to the seminar.

"This is a serious law in our country that is affecting everybody else in their country," Polak stated, adding that the regulation requires the withholding of tax for those liable taxpayers.

"If you touch the money of a US taxpayer, send us 30 per cent, please. If you don't collect it from them, then we will come along and who will we collect it from - you," he said. "We have to get it one way or another."


Source:
steven.jackson@gleanerjm.com
Jamaica Gleaner
Friday May 10, 2013

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