Bahamas Targets Tuesday For Fatca Deal Completion
The Bahamas is aiming to complete its FATCA Intergovernmental Agreement (IGA) this coming Tuesday when a high-level team visits Washington, a Cabinet Minister yesterday disclosing this nation was pushing for another key product to be exempt from reporting requirements.
#While declining to name the product in question, Ryan Pinder, minister of financial services, told Tribune Business that the impact for the financial services industry would be “pretty significant” if the Government was successful in its negotiations.
#Mr Pinder said his Ministry was still negotiating with the US Treasury and Internal Revenue Service (IRS) over the language in the Bahamas’ IGA, seeking in particular to ensure there was nothing that committed this nation to broader automatic exchange of tax information talks with other nations besides the US.
#Criticising the former Ingraham administration for having “done nothing” to prepare the Bahamas for the Foreign Account Tax Compliance Act (FATCA), despite initial implementation having been 18 months away when it demitted office, Mr Pinder said he believed the current government had “accomplished everything we could” in achieving the best possible outcome for the Bahamas.
#He disclosed that the Ministry of Financial Services’ team had spoken to their US counterparts yesterday morning over the Bahamas’ proposed IGA, going over the wording and “final issues”, and disclosed that “there were some areas we are strongly advocating for”.
#Tribune Business previously reported that The Government is pushing to remove a clause in the draft IGA with the US that would commit this nation to deepening its involvement with Europe and the OECD on tax information exchange.
#Dr Nicola Virgill-Rolle, the director of financial services, said earlier this year that the Bahamas was determined to restrict the IGA to something that was “FATCA specific only”.
#The IGA’s proposed Article Six, titled ‘Mutual Commitment to Exchange of Information’, in its initial form extended well beyond FATCA to require the Bahamas to “develop common reporting and exchange of information” systems with the European Union (EU) and the Organisation for Economic Co-Operation and Development (OECD).
#“We will look particularly at this,” Dr Virgill-Rolle said at the time. “It talks about a commitment to work further with the OECD and EU, but we think this document should speak to FATCA only.”
#Mr Pinder yesterday confirmed this issue remained the Bahamas’ main concern and negotiating position, adding: “Our position is that we will address these issues, whether they come from the OECD, G-20 or Global Forum, as they come through these initiatives, and we believe this is agreement is between two parties.
#“They’re [the US negotiators’ going to go back to their higher ups to try and turn this thing around as quickly as possible.”
#Explaining the urgency, Mr Pinder said he and a government team were headed to Washington on Tuesday to meet the IRS and US Treasury and “we hope to be in a position to have agreement on the language by them.
#“If that’s the case, and we both leave that Tuesday meeting in agreement with respect to language, then you would be listed as implemented. It would put our industry in position to say we have an IGA in effect, even though it’s pending signing.”
#This, Mr Pinder said, enabled both sides to say the IGA had been implemented, despite awaiting sign-off by the likes of the US State Department and Christie Cabinet.
#Emphasising that the Bahamas’ sovereign nation status had given it a competitive advantage over rival Caribbean financial centres, such as Bermuda and the Cayman Islands, the Minister added: “Since this time last year, we may have been the only country to successfully negotiate an exemption in the annex for products.
#“We’re trying to negotiate a similar sponsored exemption, as we negotiated for trusts prior, for another product. We’re working through that as well, and if we get that done it will be pretty significant as well.”
#Describing the Bahamas as the “pre-eminent offshore trust jurisdiction in the world”, Mr Pinder said that without the exemption FATCA would have demanded a register of trusts domiciled here, something that went beyond the initiative’s scope and threatened the confidentiality and security of clients from volatile nations.
#Earlier, addressing a Bahamas Association of Compliance Officers (BACO) meeting, Mr Pinder urged the financial services sector to advise the Government on whether it wanted guidance notes and/or technical assistance to assist with the Model 1 implementation.
#He noted that while the Cayman Islands had developed its own guidance notes, Bermuda had told its financial institutions that the IRS’s own advice was adequate.
#The Minister also criticised the former Ingraham administration for failing to prepare for FATCA, arguing that it forced the current government to start “cold turkey”.
#“The former administration had done nothing, and there was 18 months to full implementation,” he told Tribune Business.
#“The former administration had done absolutely nothing; nothing to prepare the industry, and nothing to prepare the Government. We had to pick it up immediately on coming to office, formulating strategies for industry and government on how they were going to implement.
#“We had to start cold turkey. I think our administration has accomplished everything we could with respect to FATCA.”
#Mr Pinder, whose portfolio also includes responsibility for the World Trade Organisation (WTO) and other trade liberalisation negotiations, acknowledged that the Christie administration would play a vital role in positioning the economy for the next generation of Bahamians.
#“How we position ourselves over the next 12-18 months with respect to all these international initiatives in financial services, trade and economic development will position the Bahamas from an economic development point of view for the next generation,” Mr Pinder told Tribune Business. “It’s a very fundamental time in the development of the country.”
#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 them to the IRS or face a 30 per cent withholding penalty. 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.
#The exchange of information, under the FATCA IGA, will start in September 2015 for Bahamian institutions’ existing accounts as at June 30, 2014, and any new ones opened subsequently.
Credit: Tribune 242