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Channel Islands Rebuff UK's FATCA-Style Plans

by Jason Gorringe,, London

17 December 2012

Jersey and Guernsey have released a joint statement indicating that they will not sign an enhanced Tax Information Exchange Agreement with British authorities unless the UK's proposed Foreign Account Tax Compliance Act (FATCA)-style initiative targets global adoption.

The statement comes following an announcement from the other Crown Dependency, the Isle of Man, that it has agreed with the UK to sign an agreement that would provide for automatic information exchange in relation to deposits from UK taxpayers held by the island's financial institutions.

For the time being, Jersey and Guernsey would continue to share information with UK authorities upon request, under the tax information exchange framework developed by the Organization for Economic Cooperation and Development, which allows the UK to request information in specific cases, where there is evidence of the perpetration of fiscal crime.

FATCA - the framework the UK intends to follow -was enacted by the United States Congress in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, with foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.

To simplify the administration of the new system, several countries have been invited to enter into inter-governmental agreements with the US on a bilateral basis, to ease the compliance burden on local financial institutions by allowing them to report data directly to the tax authority in the country in which they are based, rather than to the US Internal Revenue Service.

The Guernsey and Jersey governments jointly stated:

"As communicated last week, officials from Guernsey, Jersey and the Isle of Man continue to engage with US officials, aimed at concluding Intergovernmental Agreements under the US FATCA regulations."

"We also share a common commitment with the UK to combat tax evasion and to participate in international efforts to combat financial and fiscal crime. We have long made it clear that neither Island has any wish to accommodate those engaged in tax evasion."

"The UK government is seeking to promote more widely as a new international standard the principles of the US Foreign Account Tax Compliance Act. Jersey considers that it is important that in doing so the UK government mirrors the approach of the US FATCA in being global in its application, ensuring a non-discriminatory approach for all jurisdictions."

"In our ongoing discussions with the UK government we will be pressing them to make clear the steps they are taking to promote the adoption of automatic exchange of information worldwide to ensure that a level playing field is achieved for all finance centres competing in the global market place."

TAGS: Isle of Man | compliance | tax | interest | banking | international financial centres (IFC) | Guernsey | Jersey | tax authority | offshore | agreements | United States | regulation | Compliance

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