No secrets under FATCA
Information about financial accounts held by Barbadians in the United States could soon have to be reported to local authorities.
And accountants, operators of offshore entities and legal advisors have been warned that there was a possibility that nothing they do financially in the future would remain a secret.
That’s because, according to business consultant Glenna Smith, the Foreign Account Tax Compliance Act (FATCA) Intergovernmental Agreement (IGA) between Barbados and the US will not only require foreign financial institutions to report to the Internal Revenue Service (IRS) information about financial accounts held by US taxpayers, or by foreign companies in which US taxpayers hold a controlling interest, but information could also flow in the opposite direction.
Smith, managing director of Smith Compliance Consulting Inc. made the disclosure as she addressed the Institute of Chartered Accountants of Barbados’ International Business Annual Update 2014 at the Lloyd Erskine Sandiford Centre.
The FATCA, which Barbados is expected to operationalise by September 2015, was enacted in 2010 by the US Congress to target non-payment of Federal Taxes by US taxpayers who utilise foreign accounts for this purpose.?
“The model agreement that Barbados has entered into is actually a Model 1A IGA, and that is because the agreements can either be non-reciprocal or reciprocal. Barbados has entered into a reciprocal one. So, in theory, we should also receive information back from the US on any Barbadians that have accounts in the US,” said Smith.
She said there was a possibility that the signing of the agreement with the US was just the start and it could “broaden out and become a worldwide thing between developed nations”.
Responding to questions following her presentation, Smith said no timeline was put on when Barbadian authorities could start asking for information under the agreement. She said it was up to the G8 and G20 leaders to determine.
Smith said, however, the Organisation for Economic Cooperation and Development was playing a major role in the setting up of the framework.
“So they have been trying to work at this for a few years now. I think FATCA probably helped them try to expedite the need for that because there are some countries that are a little bit off-put by feeling like we all have to send our information to the US but nobody else is getting information, because not everybody has received a reciprocal IGA agreement,” she explained, adding that she hoped to hear more on the progress within the next two years.
Meanwhile attorney-at-law Sir Trevor Carmichael said given China’s and Russia’s quick signing of similar agreements with the US, the sharing of financial information on citizens could soon become something of the norm globally.
“What is clearly the case is that we are in for a lovely, lovely, cozy sharing of information and nothing that we do financially in the future will ever be a secret,” he said.
Failure of financial institutions to comply under the FATCA will result in a penalty of a 30 per cent withholding tax.