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TT must put house in order or face penalties - tax experts

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LIKE an oncoming storm, the United States Foreign Account Tax Compliance Act (FATCA) is bearing down on countries around the world. This country’s Government and financial institutions now have to put their house in order for compliance or face possible international blacklisting and severe penalties respectively.

FATCA was the topic up for discussion at a breakfast meeting yesterday hosted by the Chamber of Industry and Commerce and the Association of Compliance Professionals of Trinidad and Tobago and held at the Chamber’s offices in Westmoorings.

FATCA was enacted by the United States Government in 2010 to assist in the combatting of offshore non-compliance. It applies to any individual, US or global banks, or institutions, and any company or business entity that engages with US clients, or assets over a certain threshold in an account.

FATCA requires that Foreign Financial Institutions (FFIs) and global banks, register with the US Internal Revenue Service (IRS), and enter into an FFI agreement whereby they promise to identify, collect, and report information on offshore bank accounts of their US clients.

Yesterday at the meeting chairperson of Anti-Money Laundering and FATCA subcommittees of the Bankers Association of Trinidad and Tobago, Janelle Bernard, said non-compliant FFIs “stand to lose 30 percent of investment income from various assets and 30 per- cent of trade proceeds for various assets.”

“In addition compliant financial institutions will impose onerous requirements on non-compliant institutions including ending banking relationships,” she added.

She noted there are also implications for this country including the increased risk of international sanction and any non-compliant country could be blacklisted. This could damage the country’s reputation and negatively affect trade, she explained. She said the association recommended that the country engage in a reciprocal arrangement with the US on tax information.

“Government as a matter of urgency must commence negotiations in signing a model one IGA (InterGovernmental Agreement) and we strongly suggest the signing be done prior to September 2013,” she said, noting this was the cut off date for the first phase of registration.

Through the model one IGA FFIs will report information to their national tax authorities, in the case of Trinidad and Tobago the Board of Inland Revenue, which will then report it to the IRS.

For local financial institutions Bernard said the FATCA implementation cost is estimated at US $100 million.

“With high compliance cost we expect that financial services businesses will pass on costs to their clients,” she added.

She noted that the inflation rate and growth prospects will be adversely affected and less funds will be available for investment from financial services providers seeking to become compliant.