By NATARIO McKENZIE
Tribune Business Reporter
A leading accountant yesterday described the mechanism the Bahamas will use to comply with the US Foreign Account Compliance Act (FATCA) as “no small undertaking”, suggesting there was no simple “flip of the switch” for providers once the Government has the necessary infrastructure in place.
Lawrence Lewis, a partner at Deloitte & Touche (Bahamas), added that while Bahamas-based financial institutions had made advances towards FACTA readiness in recent months, he nevertheless anticipated a “mad dash to the finish” once the Government provides more clarity regarding the inter-governmental agreement (IGA) and necessary legislation.
“I’m very pleased that that process regarding the necessary infrastructure is taking place,” Mr Lewis said.
“This is not a small undertaking, and while I understand the Ministry’s position in wanting to wait until there was a lot more clarity in respect to what they would do with respect to the IGA, it does put institutions at a little bit of a disadvantage.
“Government has to go through its processes first, get the technology ready and then business will have a level of interaction and get their systems lined up. That’s not quite as easy as flipping a switch when the Government says they are ready. The more lead time they have, the better they would feel about it.”
Ryan Pinder, minister of financial services, said earlier this week that 12 firms - both Bahamian and international - had responded to the ministry’s request for proposal for the development and implementation of a FATCA reporting system. Mr Pinder said the ministry hoped to bring a recommendation to Cabinet on the matter next month.
Regarding the industry’s overall state of readiness, Mr Lewis said: “Industry continues to progress in terms of readiness. I suspect that there will still be a number of organisations that will have challenges in terms of their preparation and readiness.
“I think that a fair amount of organisations are making good steps. A number of them are waiting on the Government for more information on the enabling laws and the guidance supporting it, although it’s broadly known what’s expected.”
Mr Lewis added: “I think overall there has definitely been significant advancement over the past few months. I expect it will be a mad dash to the finish once the Government provides a little more clarity around the IGA and the legislation. That’s when you will see a lot of organisations that may not have paid a lot of attention or just lip service to it really move to try and complete the things they need to do.”
The Government has chosen a Model I Intergovernmental agreement (IGA) with the US Treasury for FACTA compliance. 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 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.
Mr Pinder said the Government is targeting July 1 as the target date to be fully signed up to FATCA.