Local banks appear to have been slow to respond to a new United States tax compliance law which will require them to provide the US Internal Revenue Service (IRS) with financial information on US citizens possessing local bank accounts containing amounts exceeding US50,OOO (G$100 million) or foreign entities in which U.S. taxpayers hold a substantial ownership interest.
The US Foreign Account Tax Compliance Act (FACTA) will effectively require local commercial banks to provide the IRS with what in some cases is sensitive financial information on Guyanese-born holders of US Green Cards and passports who have accounts with local commercial banks. The Act requires financial institutions around the world to state whether their customers are “US persons”. Critics say that the definition of the term “US person” is very broad and can encompass people who have a green card or even a US mailing address, according to a report in the Jamaica Observer.
The new US law applies to banks, building societies, credit unions, securities establishments and insurers and contains provisions for the blacklisting of banks that fail to comply.
Banks and other financial institutions have until January 2013 to agree to comply with the new tax compliance Act or face possible blacklisting by the US authorities.
Local commercial banks with which Stabroek Business spoke have been largely tight-lipped on the new US legislation with some saying that the matter had not come up for discussion internally. One commercial bank source told this newspaper that the matter had “only just surfaced within the bank” and that “no serious internal discussion” had taken place on the issue.
Another banking source told this newspapers that the matter would have missed the last meeting of the local Association of Bankers – comprising heads of local banking institutions – and would likely surface at the next meeting of the body.
A Scotia Bank source told this newspaper that as a Canadian banking institution it was in compliance with a similar Canadian law which required it to provide the authorities with information on bank accounts being held by Canadian citizens – including Guyanese resident in Canada – in the Scotia Bank system here in Guyana. The source also said that while the issue of the US Tax Compliance Act was yet to be discussed at the level of local Scotia officials it was likely that the bank would comply with the requirements of the Act.
Whether or not to comply with the new law has been the subject of heated debate in Jamaica where banking officials have pointed to what they say is a conflict between the US Tax Compliance Act and Jamaican laws governing confidentiality and data protection.
While the stated aim of the law is to apply greater pressure on US tax dodgers who hide large sums of money in offshore accounts in an effort to evade taxes, one banking source who agreed to speak with Stabroek Business said that “some people will be even more worried about the various other purposes for which that kind of information can be used.” Asked to elaborate the source said that the US authorities may actually become interested in “other issues like how the money was acquired in the first place” and that “raises a whole number of different issues. There really is nowhere to hide,” the source told Stabroek Business.
Some banking institutions in Jamaica appear less than enthused with the new law. “What is a sovereign state? These are things that we need to debate here,” said Earl Jarrett, General Manager of the Jamaica National Building Society (JNBS) recently.
A report in the Jamaica Observer earlier this week pointed to concerns by local financial institutions that the new compliance rules will, among other things, come with high implementation costs and an outflow of funds from those institutions.
Once local banks agree to comply with the provisions of FACTA, Guyanese in the diaspora who hold accounts in the local banking system will come under its provisions.
