FATCA 2013… Guyana forging ahead for compliance

Dec 28, 2012 News

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By Zena Henry
While the United States seeks to curtail tax evasion by its citizens and permanent residents through the enactment of the 2010 tax law, Foreign Account Tax Compliance Act (FATCA), Guyana along with the rest of the Caribbean has indicated willingness of adherence and has welcomed the adjusted deadline for compliance, citing more time to negotiate

a proper agreement with the U.S.
FATCA, the brainchild of United States President Barack Obama, requires that U.S. citizens and green card holders who have financial assets outside of the United States, exceeding US$50,000, declared these to the US Internal Revenue Service (IRS). Some of these financial institutes include investment firms, banks, credit unions, insurance agencies, pension schemes and other financial institutes.
January 1 of this year, was the original date for the Act’s enactment, but the new 2013 deadline will allow the region to follow the United Kingdom, Japan, Switzerland and other Western nations in negotiating a complete intergovernmental agreement with the U.S. These countries have used various models of agreements to cope with FATCA.
Guyana has already indicated its willingness to adhere to the new law. In fact, the country’s central bank is spearheading talks and maintaining contact with CARICOM, which is representing the region.

Accommodating FATCA
Deputy Governor for the Central Bank, Dr. Gobind Ganga, said that with FATCA, there are many changes that are required. To accommodate the new law, he said that changes in legislation may be necessary; this is in relation to privacy law and confidentiality between firms and clients.
Firms may incur financial additions in terms of required human resources and the adjustments of information technology systems. That is, trained human resource will be required to handle FATCA. The US had suggested that special personnel such be put in place to deal with the issue. Apart from that, firms may need to adjust their information systems to access and disseminate the relevant information.
CARICOM noted that member countries would have to adjust legislation to meet the new requirements, but that could take months. The U.S. they said, will have more information about foreign citizens than they have already, as the requirements ask for details on information about people with dual citizenship, with alien status, and those who commute and spend lengthy periods in the U.S. during the summer and other holiday seasons.

Caribbean task force and U.S. negotiations
Ganga however said that the Caribbean has adopted a holistic approach and has put in place a Caribbean task force to speak on behalf of the region, which is chaired by the Jamaican Central Bank. He said it was put in place, “To ensure that legal requirements are met, to assess our level of compliance, cost and information technology needs.”
The task force would be responsible for making contact with US officials in terms of negotiation and bargaining. Talks had already been initiated, but the Caribbean bloc’s Guyana-based secretariat had noted that efforts to have formal talks with U.S. Treasury officials failed because of the distractions associated with the November presidential elections. The extended time of compliance will give CARICOM countries more leeway for negotiations in the new year.
These negotiations will be based on various agreements that could be made.
“There are models of agreement,” Ganga said. These were some of the agreements already entered in by some of the more developed countries where another manner of information exchange would occur.

Implications of non-compliance
While it is not absolute that nations comply with FATCA, there may be adverse financial effects. For one thing, there would be a 30 percent withholding tax if the necessary information is not declared to the IRS. That means that financial institutes within the country which transact business in the US and have money passing through the country, 30 percent of that would be withheld.
Another issue not instantly highlighted is that of loss of business for non-compliant firms. This means that other organizations may cease business because of an institutions’ unwillingness to comply with FATCA, this especially relates to US-based business entities.
On an individual note, persons may be looking at their income being taxed twice. That is while the US is seeking its tax cut, the country having to report to the IRS may also be taxing money that would be entering the country.  Apart from that, persons with various statuses will also be taxed. That is, joint accounts, partnership and other account holders may be taxed differently. This can however be done to the accounts of one person holding several accounts and transacting business with various financial institutes.
Nevertheless, the Central Bank Deputy Governor said that Guyana is working feverishly to be ready for the stated date of compliance. All the major banks and financial institutions have indicated their willingness to comply. There will need to be annual reports to the IRS.
“Knowing the implications of non-compliance, our institutions are ensuring that they prepare for FATCA,” Ganga said.  A committee, he added, is expected to form in the new year to educate persons on FATCA and its weight.
In the meantime, CARICOM said that its public education task force will launch a campaign next year to educate bank customers about the new regulations, as staffers will be required to ask personal questions about customers as part of the compliance process.

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