Key steps being taken to comply with FATCA

GOVERNMENT HAS TAKEN key steps to meet the requirements of the Foreign Account Tax Compliance Act Intergovernmental Agreement (FATCA IGA), which allows for the reciprocal exchange of information between the USA and Barbados.

Minister of Finance, Christopher Sinckler, outlined the key steps as amending the Income Tax Act and putting the necessary administrative and IT infrastructure in place. He made this disclosure today during the Barbados Revenue Authority’s public consultation on Implementing the Foreign Account Tax Compliance Act (FATCA): Where are we Now? at the Lloyd Erskine Sandiford Centre.

Sinckler told his audience: “With respect to legislative requirements, I am pleased to inform you that the necessary amendments to the Income Tax Act have been approved by Cabinet and will shortly be brought to Parliament. Regarding the IT infrastructure, Barbados is well placed, as we have had the technology in place and in use for a number of years, though some enhancements will be necessary.

“The Revenue Commissioner has, however, assured us that she and her staff have been working assiduously to ensure that all requirements are met within the required timelines.”

Acknowledging that the tax practitioners and financial institutions would be required to make a number of substantial changes, the Minister expressed confidence that the usual spirit of collaboration would continue so they could work together to make those necessary changes for the successful implementation of this project.
“We will adequately prepare ourselves as a tax jurisdiction for facing the many challenges which confront us. More important, however, is that it will certainly enhance our reputation and our image as a clean and competent jurisdiction, full of integrity, transparency and openness as it relates to the administration of taxes,” he declared.
Sinckler noted that tax administrations across the world had to respond to globalisation and the fight against tax evasion with enhanced enforcement, including increased and intensified exchange of information; intensified examination of transfer pricing cases; and increased cooperation, coupled with the use of joint and simultaneous audits.

He stated that as the borders for taxation widened with incomes and profits moving between tax jurisdictions, tax administrations had to find new means of reducing the level of tax avoidance, and to ensure that the country received its share of the tax payable on certain income streams leaving the country. According to him, this has impacted on areas of business, from the entertainer/entrepreneur to the largest corporation.

He said that in order to avoid persons being taxed by more than one jurisdiction, Double Taxation Agreements were established. He added that these Treaties were negotiated to indicate who had the right to tax and the amount of tax due to each State.

“In some cases, only one State may have the right to the tax. Where, therefore, for instance Barbados fails to withhold taxes to which it is entitled, the Taxpayers State of residence (that is, the original jurisdiction), will have the full benefit of the tax or the taxpayer could even evade being taxed completely.

“As is the case with entertainers, especially around this time of Crop Over, we have sought to encourage the free movement of professionals and other categories of workers across the region and encourage international performers to come to our shores. However, we still want to ensure that the fair share of tax of their earnings are paid to us in accordance with our Laws and any Treaties which we may have negotiated and put in place,” Sinckler pointed out.

FATCA is a mechanism being used by the United States of America to address the new landscape of information exchange standards and processes. A Federal statute was enacted in 2010 which requires United States entities and individuals to report their financial accounts held overseas. (BGIS)