By NATARIO McKENZIE
Tribune Business Reporter
A SENIOR US Treasury official said yesterday that the US government was not seeking to ‘strong arm’ foreign jurisdictions into Intergovernmental Agreements (IGA) for Foreign Account Tax Compliance Act (FATCA) reporting.
Danielle Rolfes, deputy international tax counsel to the US Treasury Department, said during a regional FACTA conference that work had been done to reduce the burdens associated with the Act’s implementation.
These reforms, though, remain consistent with the overall objectives of the Act.
“We really do intend for there to be three options to implementing FATCA, and that no option be more burdensome than is necessary to achieve the objectives of the statute,” said Ms Rolfes.
“We intended our final regulations to be an equally possible route forward for implementing FATCA, and are in no way trying to strong-arm Intergovernmental Agreements. We have a preference, I think as administrators;l we would prefer to deal with another government, but the statute that we have calls on us to enter FFI agreements with foreign financial institutions and we intend to do that in the least burdensome way as possible.
Ms Rolfes said that in countries without an IGA, foreign financial intuitions will enter into agreements with, and report directly to, the IRS.
“There are jurisdictions that will choose not to use an Intergovernmental Agreement but will change their laws in order to ensure that financial institutions comply directly,” she said.
In countries with a Model 1 IGA, the government is responsible for collecting data from FFIs and is obliged to report this to the Internal Revenue Service (IRS). Under Model II, FFIs will have to report the necessary information directly to the IRS and, if local law requires it, they will have to obtain consent from their account holders before transmitting the information.
“Both model agreements acheive the statute’s objectives by taking the same quality and quantity of information on US accounts while overcoming impediments under local law,” said Ms Rolfes.
“This is to say that neither of the model Intergovernmental Agreements are exceptions to FATCA. We do think that by implementing FATCA on a government to government basis, certain burden reductions are achieved based on that governmental cooperation.
“Under a model I, a FATCA partner agrees to collect the information under its own domestic laws so that the financial institutions are reporting to their own country and the partner, and the IRS would exchange that information in a government to government exchange.
“In some cases in a model I, and only in a model I, the IRS would agree to collect and provide similar information to the FATCA partner,” said Ms Rolfes.
Financial Services Minister, Ryan Pinder, recently said the Bahamas was working towards a June 1 deadline for a final decision on how it will approach FATCA reporting.
FATCA, which was brought into law in March 2010, is a set of rules from the US Internal Revenue Service (IRS) designed specifically to limit tax evasion by US persons living abroad.
Compliance could include entering into a Foreign Financial Institution (FFI) agreement with the IRS, if the business concludes that it needs to become a participating FFI. 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.