Local banks are on track to being compliant with US tax legislation, the Foreign Account Tax Compliance Act (FATCA), by next year’s deadline, Bankers’ Association president David Dulal-Whiteway said yesterday.
FATCA was enacted in the US Congress in 2010 and is part of that country’s effort to combat tax evasion by US citizens holding overseas investments.
“US taxation rules require US citizens pay taxes on worldwide income regardless of where they are. Our taxation system depends on residency, so if you are a citizen but do not reside here you don’t have to pay taxes,” he told the Express in a brief telephone interview.
Dulal-Whiteway, who is also managing director of Republic Bank, said the biggest challenge facing banks is going out to all customers to determine who is a US citizen.
He said: “It will require a lot of programme changes. On our current system we do not require people to state (citizenship); we go strictly based on residence. It will be a costly exercise to the banking system in general because we are now capturing information we do not normally take.
“And then we have to forward that information to the US Internal Revenue Service (IRS). That leads to another issue because T&T has (privacy) laws where banks can’t just share customer information to a third party.
“Therefore certain laws will have to be changed locally. Once we get all that info, then there are different categories of reporting, based on the amount of deposits you have in the account.”
He said the Ministry of Finance had recently announced plans to enter into an inter-governmental agreement with the IRS through the Board of Inland Revenue (BIR) to make reporting as per FATCA regulations simpler, where banks make their reports to the BIR, which will then forward them to the IRS.
Dulal-Whiteway said being FATCA-compliant was necessary in order to maintain current relationships with US banks.
He said: “We keep all our corresponding accounts with US banks, and if you don’t comply with the new legislation then most likely they will say you are not compliant and therefore cannot hold US dollars within the US banking system.
“You can imagine the implications from that: if people want to import things from the US and we have no relationship with US banks, we can’t send money to them, for example. It would create significant problems from a banking perspective.”
In an exclusive interview with the Express, published yesterday, US Vice-President Joe Biden, who arrived here last evening and will depart tonight, said the purpose of FATCA is to address concerns with offshore tax evasion.
“If we work together to detect, deter and discourage offshore tax abuses through increased transparency and enhanced reporting, we will help build a stronger, more stable, and more accountable global financial system. That’s our goal,” he said.