The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Intergovernmental Agreement (IGA) route for complying with the US Foreign Account Tax Compliance Act (FATCA) may be the most viable for the Bahamas, Deloitte and Touche’s lead partner on the initiative believes.

Lawrence Lewis told Tribune Business that financial institutions would be keen to securing the coverage an IGA gives, rather than run the risk of potential conflict between client contractual relationships and Bahamian laws regarding confidentiality.

Mr Lewis added that not going the IGA route, but instead having Bahamas-based institutions report directly to the IRS, was still an option but perhaps not the most viable one for this jurisdiction.

“It’s an option; I don’t know if it’s viable for the Bahamas. Sitting in the position of a financial institution I would want the coverage that an IGA gives,” he said.

“Rather than having to enter into an agreement directly with the IRS, and having that potential conflict between that contractual relationship and the domestic laws around client confidentiality, I would rather have a framework of an IGA, whether a model I or II, that allows me to only report if I have gotten consent to report, and there is some further process that operates by law that then compels me to give information to a local authority and then pass it on. That’s a far better solution for me rather than going an FFI agreement alone,” said Lewis.

The Minister of Financial Services, Ryan Pinder, recently told Tribune Business that he was in the process of forming a FATCA team to “proceed with haste” on an industry assessment programme that would look at the financial services industry’s readiness for FATCA, plus get their opinion on the two model IGA agreements.

“Model II is not substantially different from what we thought it would be,” Mr Lewis said. “I can see that some institutions would prefer model II, others would likely prefer model I.

“Whether we go for a model II or Model I, that ultimately remains to be decided. I think we would need to have an IGA at the latest by the middle of next year for organisations to feel comfortable that they are going to be covered and not have to go down the path of the details of the FFI agreements we may have otherwise have had to sign.

“Effectively, the Government has got to start on its consultation process pretty quickly. Before the end of this year they need to start on that process. It probably would need to be concluded by the end of the first quarter of next year, so by the end of the year they would have concluded that, know their position and begin negotiations around that.”

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.

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.