The Caribbean Community is looking at spending nearly quarter of a million dollars on a Washington-based consultant to lobby the Trump administration about the Foreign Accounts Tax Compliance Act, reports Cayman Compass.
Cayman appears unlikely, however, to be affected by any lobbying – or even FATCA repeal – in the wake of last year’s enactment of Common Reporting Standards by the Paris-based Organisation for Economic Co-operation and Development.
In mid-February, Trinidad and Tobago Prime Minister Keith Rowley announced moves by the 15-member CARICOM bloc to spend $240,000 countering a FATCA threat to correspondent banking in the region.
As reported by the island state’s Daily Express on Feb. 18, Mr. Rowley said the organization would jointly contribute the sum, employing lobbyists to ensure Caribbean banks did not suffer censure or loss of correspondent banking access.
“It is only for a short period as it is a specific assignment,” he said in an address. I think it’s US$40,000 for the period for which the lobbyist would be hired to carry out this specific exercise,” he said after returning from a two-day Guyana meeting of CARICOM heads of government.
They had agreed, he said, “that cost should be incurred and the lobbyists should be hired and put to work to join the efforts made by CARICOM to ensure that we stave off any further de-risking or loss of correspondent banking access.”
Calling it “a threat to our banking system,” the prime minister worried about a “collapse of the banking [system] in the region if in fact we are to find ourselves regarded as a high-risk area and lose correspondent banking facilities.”
The move, however, appears to be less than a push for FATCA repeal as an effort to avoid penalties should Trinidad and other CARICOM members delay acceptance of the U.S. tax legislation.
CARICOM needed to ensure its banking system was not denied access to corresponding banks and, therefore “not denied access to our trade,” he said.
“We are at great risk,” Mr. Rowley said, urging countries “to ensure that we pass the necessary legislations, that we are compliant with the international standard that is demanded of us and that we ensure that we make every effort that we lobby in the relevant quarters that we are not treated adversely,” he said.
In late November 2013, Cayman’s Tax Authority agreed to provide details to Washington’s Internal Revenue Service of all Cayman’s U.S.-resident and U.S.-affiliated account holders at 28,559 locally based “Foreign Financial Institutions.”
The move, affecting nearly 6,000 local residents, has generated intense opposition, as some have called FATCA “unfair and outrageous,” demanding “the USA [come] into line with every other country in the world and stop taxing its citizens on citizenship, but [instead] on residence.”
Director of Cayman’s Tax Information Authority Duncan Nicol was unavailable for comment, attending an OECD meeting in Europe, but it is unlikely his office will seek FATCA repeal.
Experts have described 2010’s FATCA legislation as the first global tax-information legislation of its kind, forcing it to “come out with guns blazing in a sense,” one analyst said.
FATCA has since been augmented, however, by 2013’s multilateral Mutual Administrative Assistance in Tax Matters, which Cayman joined in 2014, and is now among 108 signatories, and the same-year introduction by the OECD of global Common Reporting Standards, which Cayman signed only this year.
The standards call on jurisdictions to gather information about account holders at local financial institutions, reporting it globally.
“This new standard on automatic exchange of information will ramp up international tax cooperation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion,” OECD Secretary-General Angel Gurría said at the time.
In a footnote to the 100-jurisdiction listing, the OECD says the U.S. is “undertaking automatic information exchanges pursuant to FATCA from 2015” and “has entered into intergovernmental agreements with other jurisdictions to do so.”
Those agreements, the footnote says, “acknowledge the need for the United States to achieve equivalent levels of reciprocal automatic information exchange with partner jurisdictions,” accompanied by “a political commitment to … advocate and support relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.”
Growing global regulation makes FATCA just one tax-reporting scheme among many.
The Mutual Administrative Assistance convention alone “means certain information will go back to your home jurisdiction, and your tax man will give you a call if you haven’t reported it,” one legal expert said.
And even if FATCA goes away, he said, “the Common Reporting Standards will kick in.”
Article compliments IFC Review.