FATCA CONTINUES TO SEND SHOCK WAVES THROUGH FINANCIAL SERVICES INDUSTRY

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On 6 March 2014 the Government of the Virgin Islands and the Government of the United States concluded its negotiations, and initialled the final text of an Inter-governmental Agreement (IGA) in respect of the US Foreign Accounts Tax Compliance Act (FATCA), paving the way for its imminent signing and implementation in the Territory. But the fears and misgivings of some members of the Opposition remain.

FATCA requires that offshore financial Services jurisdictions such as the BVI report to the US Internal Revenue Service (IRS) the assets of its US taxpaying clients. The requirement became an area of concern for many here in the Territory and prompted Government to hire a consultant to hold public discussions on the subject last year. Topping the list of the FATCA concerns were issues of possible future double taxation for persons holding dual citizenship and fear of what would happen if similar Acts were enacted by other countries.

Speaking in the House of Assembly on 13 March, First District Representative, and Opposition Member, Hon. Andrew Fahie warned that other FATCA type legislations might be coming. The Legislator told the House: “The financial services industry is an industry that we have all benefitted from, if you ask me our people are starting to understand this a little late in the ball game. When I say late in the ball game I mean the industry is under attack and while it is not popular, the most we can do is try our best to see what percentage of the industry we can save based on the volume of attack.”

Hon. Fahie opined that the dire financial situation of many countries around the world will prompt such nations to implement FATCA type legislations to get back lost revenue; which is what he said the United States did.

“I can almost bet my bottom dollar, if I was a betting man that the other countries are sitting waiting to see how this is going to work out with America, and after that you will see the French coming with something name FRENCHCA. Every other country will come with something else and Madam Speaker it is going to come down to a point where we are going to be in the biggest fight, although we are in a fight now; but the biggest fight that we ever had in our life, not only us but all jurisdictions to survive in the industry,” the Opposition Member said.

Hon. Fahie explained that other FATCA type Acts can cripple the financial services industry because foreign citizens will no longer see overseas jurisdictions as viable financial options: “The question will be asked by those investing abroad, who are doing it legally …‘well if my country is after me with this, then why do business abroad, better I go back home’…So the industry – financial services – is under attack, that is the reality of it,” Hon. Fahie stated.

BVIFC Worried

The BVI International Finance Center (BVI IFC) which is the agency that is responsible for the marketing and promotion of the Territory’s financial services sector is also concerned about FATCA and made this known in the 2012 BVI IFC report that was laid in the House of Assembly on 17 December, 2013.

The document listed FATCA as one of the external issues the Territory has to deal with and also opined that there might be more like FATCA on the horizon: “We believe (FATCA) may still be just the precursor to efforts to harmonize tax policies globally. FATCA and other initiatives by supranational bodies may have significant implications for the BVI, not just the administration burden, but its shifting of business if they are not applied concurrently and universally across all jurisdictions. It is, therefore, necessary to continue presenting the case for a level playing field and universal application in such initiatives, not just targeted at IFCs. The right for countries to have their individual tax policies should also be emphasized in the debates,” the report went on to state.

Hon. Fraser Sounds Alarm

It was opined that it is only a matter of time before all foreign nationals (Belongers or not) are forced to pay double tax. This speculation was made by Opposition Member and Third District Representative, Hon. Julian Fraser during a public meeting that was held in his District on 5 December 2013.

The Opposition Member accused the Government of opening the door to double taxation, and creating room for any country in the world to gain access to its citizens living in the Territory.

Hon. Fraser said: “I believe that this is going to be a global thing as well! Every country is going to do their FATCA, so if you think that I am speaking specifically to United States citizens, United Kingdom citizens or BV Islanders who are United States citizens or Green Card holders you are dead wrong. If you are a Jamaican or any other nationality living in the BVI what this is saying is that our government will collect information on you (your property, bank information etc) send it to your Government back home, and they will tax you on it back home. While you pay taxes here!”

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