By NEIL HARTNELL
Tribune Business Editor
The Government yesterday said it has received bids costing up to $63 million for its Foreign Account Tax Compliance (FATCA) reporting system, which will process US client records from 2,000 financial services providers.
Dr Nicola Virgill-Rolle, the director of financial services, told a Society of Trust and Estate Practitioners (STEP) luncheon that the Government was aiming to select its preferred bidder by April, after receiving 14 bids ranging from that peak to just $500,000.
Indicating that price may not be the deciding factor, Dr Virgill-Rolle said: “We want to make sure we get the best product... We have until September 2015, which is the ‘go live’ date. We have to look at how we staff this, and we have to get this right.
“One thing the IRS has said to us ius that they will issue no comfort rulings. We’ve got to get it right.”
She added that between 600 to 2,000 Bahamas-based financial services providers would, “for the first time”, be required to supply the Government with records and information on US clients, hence the initiative’s importance.
The Bahamas is negotiating a Model 1 Intergovernmental Agreement (IGA) to ensure it complies with the FATCA demands of the US Treasury and Internal Revenue Service (IRS).
Under the terms of the agreement presently being negotiated between Nassau and Washington, all Bahamas-based financial institutions will have to supply the Government with the required information, with the latter then passing this on to the IRS/US Treasury.
Dr Virgill-Rolle said that while the Model 1 IGA would likely reduce the FATCA administrative and compliance burden for Bahamas-based financial institutions, it put the onus on the Government - via the Ministry of Finance - to implement a completely new information gathering/reporting infrastructure to interface with the IRS.
She added that the draft FATCA legislation/regulations, plus accompanying documents such as the IGA, would likely be available for review by the Bahamian financial services industry next month.
Further guidelines would be released in June, with construction of the Government’s FATCA reporting system starting in March. System testing, and interfaces with Bahamas-based financial institutions, was set to commence in February/March next year.
“We are the first jurisdiction to put out a Request for Proposal to see how much this costs,” Dr Virgill-Rolle said yesterday, the Government having received a total of 14 bids. Whether the cash-strapped government will want to pay $63 million, even if it is the best bid, is another matter.
Meanwhile, Dr Virgill-Rolle said the Government was “blazing away” with drafting the legislation to facilitate the Bahamas’ FATCA compliance, even though no other country had publicly released its own version.
“It will determine what information is to be kept,” she added of the legislation. “It will compel institutions to undertake due diligence procedures. It will compel financial institutions to send the information to the competent authorities in the prescribed time period.”
Dr Virgill-Rolle said the Government wanted to allow enough time for Bahamian financial services providers to
“validate” their US client information and make sure it was correct.
She added that the FATCA reporting system would be designed to detect minor reporting errors, with the Government still mulling over the level of penalties it wanted to impose for FATCA non-compliance.
It was “weighing” the penalties contained in the Tax Information Exchange Agreement (TIEA) with the US against those demanded by FATCA, Dr Virgill-Rolle explaining that while it did not want these to be too onerous, the Government “wants something with teeth to enforce compliance”.
Dr Virgill-Rolle added that the ability of Bahamian financial institutions to challenge demands for client information in the courts had “narrowed” under FATCA, as the only issue for consideration was whether the person was a US citizen.
“With automatic exchange of information, there’s always going to be Judicial Review, but the scope for challenge is so much more narrow: Is it a US person? That’s the only one for challenge,” she added.
Dr Virgill-Rolle said the Bahamas’ was also constantly reviewing the ‘Most Favoured Nation’ clause in its draft IGA, to ensure that the US treats it no less favourably than any other nation when it comes to FATCA.
And she added that the US had accepted the Bahamas’ argument that its initial FATCA demands were seeking to create a ‘trust register, and seeking information that was not needed. It ultimately backed off.