The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The MINISTER of Financial Services yesterday said the Government has made no decision on what approach the Bahamas would take over the US Foreign Account Tax Compliance Act (FATCA), and whether it would sign a government-to-government agreement to protect the sector.

“From my point of view, and the Ministry’s point of view, we have been undertaking significant consultations on the issue with various industry groups to get a feel for their preparedness, where they stand on FATCA and to begin at least initial consultations on opinions of the concept of an inter-governmental agreement. A couple of models have been released in that form and we want to get the industry’s consultation on that,” said Ryan Pinder.

The Bahamas has a choice of whether to allow its individual institutions to comply by signing their own agreements with the Internal Revenue Service (IRS), or agree an intergovernmental deal where the Government would supply the information Washington is seeking.

“From the Ministry’s point of view, one thing we want to do before a recommendation is made to government on whether to consider an intergovernmental agreement or not is to, one, get a thorough understanding and assessment of the financial services industry and the different sectors within the industry, and we would like to perform that professional assessment,” Mr Pinder added.

“We want to get a report prepared on the status of preparation as well as opinions, advice and recommendations as to what the Government would do with respect to an intergovernmental agreement. That decision ultimately comes down to the Government.

“The assessment hasn’t been done and the decision hasn’t been made. Frankly, I would think that there would be further models or guidance on the government to government level by the US Treasury, considering that the models they released didn’t encompass the recently executed Japan/Switzerland model. We would want to see what they propose. The only way you can do a comprehensive suggestion and analysis is if you knew, and were secure, on all the potential models  and options out there, and right now I don’t think we are.”

FATCA, which was brought into law in March 2010, is a set of rules set out by the US Internal Revenue Service (IRS) designed specifically to limit tax evasion by US persons living abroad.

Compliance with FATCA will include entering into a Foreign Financial Institution (FFI) agreement with the IRS, if an institution concludes that it needs to become a participating FFI.

Under FATCA, US taxpayers holding financial assets outside the US must report those assets to the IRS or face penalties. FATCA will also require foreign financial institutions to report directly to the IRS certain information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest.

FATCA’s demands are thus likely to impose extra requirements on all Bahamas-based financial institutions in terms of resources and time needed to do the extra due diligence, resulting in them incurring increased costs.

The three broad potential approaches to FATCA reporting include direct reporting to the IRS; the government to government information sharing approach; and direct reporting to the IRS under an intergovernmental agreement.

Regarding this jurisdiction’s level of preparedness for FATCA, Mr Pinder told Tribune Business: “FATCA is certainly an important private sector issue. The preparedness varies within the financial services industry and sector, and really by type of institution.

“For example, an international institution may be more prepared because their head office is putting in place a programme for their all of their offices globally, whereas more domesticated financial companies may be less prepared because they don’t have that necessary capital or expertise to address it in such an expeditious manner.

“I think you have different levels of preparedness throughout the industry depending on different sectors. Domestic banking institutions may be in a different position than the international banking institutions. The trust companies may be in a different position as compared to the banks.”