FATCA: Barbados revenue authority faces tough IRS test

By added on 31/07/2015

The Barbados Revenue Authority (BRA) was subjected to rigorous assessments by the United States Internal Revenue Service (IRS) recently in a bid to verify the island’s readiness to enact the Foreign Account Tax Compliance Act (FATCA), reports Barbados Today.

Anthony Gittens, the BRA’s manager of policy and planning, said as a result of the two-day evaluation by an IRS team in February of this year, BRA was forced to make some necessary changes in a number of areas in order to become fully compliant.

However, with the deadline for commercial banks and deposit-taking financial institutions to report on their clients less than a month away, concerns have been raised about the lack of readiness in this specific area as the necessary legislation still has to go before Parliament.

The disclosure came during BRA’s Implementing the Foreign Account Tax Compliance Act (FATCA). Where are We Now? public consultation event at the Lloyd Erskine Sandiford Centre this morning.

The seminar, which will be followed by a series of updates over the coming weeks, was designed, among other things, to give stakeholders an update on the island’s readiness in relation to FATCA.

FATCA, which was enacted in 2010 in the US Congress, was designed with the main aim of targeting non-payment of federal taxes by US taxpayers who utilize foreign accounts for this purpose.

Gittens said following the Inter-Governmental Agreement (IGA) that was signed between Barbados and the US in November 2014 to allow information to flow both ways, the IRS carried out “a very rigorous” assessment of the local infrastructure to ensure the country was compliant.

The BRA has been designated as the competent authority to collect the information on US account holders from local financial institutions.

Gittens said the areas examined by the IRS included the legal infrastructure, monitoring and enforcement infrastructure, as well as the information and security management systems.

He said in relation to the legal infrastructure, concerns were raised about confidentiality with regards to treaty information.

“As a result, we in Barbados have taken steps to tighten the area of confidentiality because there were concerns as to how wide information could have been shared under our domestic laws,” he said.

“In terms of information and securities management, they spent a lot of time on this area. They wanted to know if we did background checks on staff. They wanted to know what training our staff had in terms of our systems, legislation, double taxation agreements, tax information exchange agreements, as well as how often they are retrained so that they are current,” explained Gittens.

He said BRA departure policies were also examined, as well as physical access to the agency’s premises and building.

“As a result, some of you conducting business with the BRA would realize that certain procedures were put in place,” said Gittens.

“And you will soon find that coming to visit us, you will have to sign in and you will be assigned a pass indicating which floor you will be going,” he added.

Assessments were also carried out on physical document storage, system audits, and background checks made on BRA’s service providers.

In the case of monitoring and enforcement at BRA, Gittens said the IRS was “not satisfied that the penalty and fines imposed on [deposit-taking institutions] and our staff were strong enough. We have addressed that area”.

He also noted that amendments had to be made to the Income Tax Act.

“I can tell you it was a very rigorous and demanding two-day examination,” said Gittens.

Deposit-taking financial institutions have a deadline of August 15, 2015 to give their information to BRA while the revenue authority has a deadline of September 30 to transmit the information on US account holders in Barbados for the period ending December 2014, in order to avoid a US$50,000 fine.

Some stakeholders have raised questions in this regard, given that amendments to the Income Tax (Automatic Exchange of Information) Regulations 2015 are yet to be passed in Parliament.

However, they were given the assurance that the legislation would be ready “within weeks”.

Acknowledging that a number of key infrastructural and legislative changes were necessary if Barbados were to meet the requirements of the IGA, Minister of Finance Chris Sinckler said Barbados had already committed to the FATCA and had stated its intention to sign on to the multilateral convention.

“With respect to legislative requirements, I am pleased to inform that the necessary amendments to the Income Tax Act have been approved by the Cabinet and will shortly be brought to Parliament,” said Sinckler.