FATCA : WILL IT RESTRICT OUR ECONOMY?
It now seems that our money is going to be controlled once more by external governments and their regulations.
There will be instituted in our banking regulations, a requirement for some additional information on our clients’ funds, and their source of funds, especially if they happen to citizens of the USA, or simply green card holders. This is different to what is being required by the Jamaican Central Bank under the Prevention of Crimes Act (POCA), and it is called FATCA, meaning Foreign Exchange Tax Compliance Act.
At this time, we need to record for the Jamaican Government our clients’ or customer’s source of funds under POCA; now we are to declare whether the client is a US citizen or Green Card Holder, and supply proof of the amount of income that he has in Jamaica, under FATCA! Obviously this is going to aggravate the client in question, for it means giving up vital information about his personal movements and business activities.
While I appreciate that care must be taken to exclude and prevent terrorists from access to moving funds, why is it necessary for us to assist collection of Tax in the United States, for a Government Agency in the US like the IRS (internal revenue service)? This is so ridiculous, being a compromise of our sovereignty, and I am hoping we can charge for the service to recover costs.
The effect of this policy to Jamaican financial institutions, including banks, insurance companies, is to:
1. Discourage Investment in Jamaica
2. Cause our banks and institutions to compromise their privacy commitments.
3. Increase operational costs of administrating a financial institution, legal office, or any business that deals with larger amounts of foreign funds and currencies.
The act further allows Financial Institutions in Jamaica to be subjected to a 30% withholding tax on income derived from any US financial assets (as a penalty) ; which may be held by the Corporation or person that decides not to declare his foreign assets and income.( ref Gleaner, 31/01/2013). The agreement to confirm is being reviewed by Caribbean Governments and US Authorities, including the IRS, and is to be undertaken in a few months, and to be completed by June 30, 2014. Any review of breaches as of now, have to be reported to the US Government by March, 2015, through a specified agency appointed for that purpose.
Many Americans do feel that this Act is inimical to American Business Interests, and are pressing for a repeal of the law, on the following grounds.
- Such declarations as are disliked by International Companies, and Countries, because it involves dealing with the IRS. This is the main disincentive for investment in the USA, as it will affect US financial markets and banking institutions.
- It will also impact US business operating in the Global Market-Place, and Americans living abroad.
FATCA legislation is predicated on the faulty assumption that foreigners throughout the world, with no predisposition to favor the U.S., will react positively to its attempts to convert them into unpaid IRS agents. Faced with similar investment and personnel options without the legal jeopardy and financial risks, reasonable people will choose non-U.S. alternatives. FATCA implementation will constitute a major disruption of the entire international financial world as we know it today. What can be predicted is that the cumulative effect of this legislation will be a major blow to U.S. economic interests and prestige. At stake for the United States is the potential loss of trillions of dollars of investment, the opportunity for American companies and financial institutions to compete in a competitive global environment and the possibility for American citizens residing overseas to survive and thrive. In essence, the economic future of the United States is at stake.
As we enter into this agreement, helping the US Government combat tax evasion, they must protect us from losses of business and the costs associated with that, and there should be no penalty for any errors in identification, oversight, or neglect.
On the other hand, should we not comply, we face termination of corresponding banking relations in the US and Internationally.