Jamaica plans to set up a central authority led by the central bank to report on the financial activities of US taxpayers to their government, which has been on a three-year campaign to track down tax cheats.
Its the latest move by the Jamaican Government to assist local institutions to comply with a new US hegemonic tax act called the Foreign Account Tax Compliance Act (FATCA). It requires local financial institutions to disclose information to the US government or face a 30 per cent penalty on income.
The creation of the central authority means Jamaican institutions affected by FATCA will not have to deal individually with the US Internal Revenue Service.
Instead, they "will make their reports regarding tax information on US persons to a Jamaican central authority. That authority will then be responsible for transmitting the information to the US tax authorities," said the Bank of Jamaica, which announced the creation of the new body on Wednesday.
"The Jamaican Government will also commit to any necessary legislative changes that will ensure that these disclosures do not breach Jamaican law," said BOJ.
BOJ Deputy Governor Myrtle Halsall will head the authority, said central bank spokesman Tony Morrison. It will utilise the services of existing central bank staff, but could recruit personnel in the long run, Morrison said Thursday.
The decision to enter into an Inter-governmental Agreement (IGA) with the US was informed by the work of a GOJ Working Group comprised of Tax Administration Jamaica, Financial Services Commission, the Attorney General's Chambers, and the Ministry of Foreign Affairs.
"The Jamaican Government, having considered all options, has determined that a Model 1 IGA is most desirable and has given approval for Jamaica to enter into negotiation for a Model 1 IGA with the USA to facilitate the implementation of FATCA," the BOJ said.
This method obviates the need for local institutions to intensely interact with US government. Efforts at comment from some of the more vocal private-sector proponents of this approach were unsuccessful up to press time.
"The execution of an IGA effectively relieves a jurisdiction's financial institutions from some of the more onerous obligations under FATCA. It also provides for important exemptions to the regime that would apply to specified institutions and products that meet certain criteria," said the BOJ.
The Government has further given authorisation for the BOJ to act as lead institution to coordinate the work of the technical team.
Jamaica expects to conclude the agreement with the US by the middle of this year, the central bank indicated.
"Financial institutions are therefore encouraged to continue preparation activities in earnest, in anticipation of the implementation of the reporting regime," BOJ said.
FATCA became US law in March 2010. The proposed regulations were issued in February 2012 with final amendments in January of this year. The law is aimed at capturing non-compliant taxpayers who use offshore institutions to conduct business. FATCA requires financial institutions to provide information on the finances of individuals classified as US persons to the IRS.
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