Urgent action by Caricom finance ministers needed on US Fatca

By added on 19/04/2012

The revelation that the new requirements under the US Foreign Account Tax Compliance Act (Fatca) have not found their way onto Caricom's agenda is very surprising, reports the Jamaican Observer.

For based on what Washington is demanding, there's no doubt that hundreds of thousands of Caribbean nationals will be affected.

As we reported yesterday, financial institutions across the world will, effective next year January, be required to identify whether their customers are what the Americans determine to be "US persons" and report their names, tax ID number, and any savings they have in financial institutions in excess of US$50,000 to the Internal Revenue Service (IRS).

The definition of a US person under the Facta encompasses people with dual citizenship, an American citizen living outside the USA, the holder of a US passport, someone born in the US, a green card holder, or someone who has substantial presence in America, that is, someone who was present in the US for at least six months.

The definition is indeed broad and, as was pointed out by Mr Earl Jarrett, the general manager of Jamaica National Building Society, and Mr Courtney Campbell, the CEO of GraceKennedy Financial Group, at this week's Observer Monday Exchange, that kind of information will prove a heavy burden on local financial institutions.

But even more crucial is the fact that the information required will place the financial institutions in breach of Jamaican law on confidentiality and data protection.

While we accept and understand the United States' desire to crack down on tax evasion, Washington, we believe, is taking the wrong approach to dealing with this problem.

At the very least, we would have expected the Americans to pursue co-operation with this legislation at the government-to-government level, instead of dealing straight with the financial institutions. For it is the governments that have the authority to amend the law if countries in the region intend to sign on to it.

It is not too late, we believe, for a correction of that course, and Caricom, we hold, needs to approach the US Government in that regard.

For, as we said before, the legislation will affect a large number of Caribbean nationals, will drive up the cost of doing business with financial institutions in the region and, will likely nurture the underground economy.

In fact, well beyond the "US person", everyone who has an account with any financial institution will be affected, as the institutions will be forced to pass on the additional costs of conforming to the US demands to their customers.

Messrs Jarrett and Campbell have highlighted the strategy being employed by a number of European countries: forming partnerships with the US Treasury in order to implement a government-to-government framework for Fatca.

It is a template that can and should be adopted by Caricom, especially for the fact that this legislation will have a social and economic impact on the region.

We hope, after yesterday's report, that the Caricom Secretariat has already started planning an urgent meeting of regional finance ministers with the aim of taking the decisions from their deliberations to Heads of Government for action.