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FATCA Burdens Worry Caribbean Economies

by Amanda Banks,, London

09 November 2012

Caribbean Export Development Agency head Pamela Coke-Hamilton has expressed concern over the burden the forthcoming Foreign Account Tax Compliance Act (FATCA) is placing on the region’s financial institutions.

Speaking at the recent Cariforum Conference on the International Financial Services Sector in the Caribbean Region in Antigua, Coke-Hamilton said that FATCA “will require US tax authorities to levy a 30 per cent withholding tax on foreign financial and non-financial institutions where new reporting requirements have not been met”. She explained that the law therefore requires expensive changes to IT infrastructure and to the legal framework governing financial services in the region.

Caribbean nations are worried about the long-term competitiveness of their financial institutions in the face of pressure to tackle international fiscal and security concerns, FATCA being one example, on a scale dictated by richer nations.

Many in the region believe that developed nations are trading fiscal compliance for continuing aid. John Benjamin, CEO of Antigua’s Financial Securities Regulations Commission, warned that wealthy nations “are armed with our constant pleas for funding and technical assistance”.

“Very few requests for financial or technical assistance from international donors will pass if the requesting country does not obtain a clean bill of health”, he warned.

FATCA requirements affect traditional financial institutions such as retail and commercial banks as well as investment banks, securities and brokerage firms, private banks and wealth management firms with American clients. They will be required to disclose information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest. At present it seems likely that foreign financial institutions (FFIs) will begin reporting income received by their clients from January 1, 2016.

France, Germany, Spain, the UK and Italy have agreed to allow relevant information to be transmitted to US authorities via a centralized authority in each nation. The Cayman Islands is awaiting the outcome of the Model 2 Intergovernmental Agreement, involving Switzerland and Japan’s reporting arrangements to the US Treasury, before evaluating its options.

TAGS: compliance | tax | investment | offshore confidentiality | interest | law | banking | international financial centres (IFC) | Cayman Islands | offshore | offshore banking | banking secrecy

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