Jamaican banks are seriously assessing the costs of complying with an imminent United States tax law requiring full disclosure of the value of accounts held by US citizens in local financial institutions.
Under the Foreign Account Tax Compliance Act (FATCA), non-compliance would result in US authorities withholding 30 per cent of US source income, including gross assets sale proceeds, should any account holder or foreign financial institution not comply.
A number of banks are currently in discussions with the local regulator, Bank of Jamaica, as well as US authorities and North American-based banking associations.
"Individual institutions are making plans to assess the likely cost and operational impact once the detailed regulations and requirements to give full effect to the Foreign Account Tax Compliance Act have been settled and established," said Bruce Bowen, president of the Jamaica Bankers' Association (JBA), in a response to Wednesday Gleaner queries.
Bowen added that efforts by the US government to enhance tax compliance and stamp out tax evasion were understandable.
"Having said that, we do have concerns," he said. "Perhaps the greatest concern that we have surrounds the significance of the cost of the due-diligence exercise that will be required to ensure compliance with FATCA," he added.
FATCA is a US measure that seeks data on US citizens from locally based banks and other financial institutions. The US Congress passed it into law in March 2010 and it is set for implementation on January 1, 2013. It gives the US increased power to attain compliance from Americans residing outside the US by coercing non-US banks and institutions to provide account information on its citizens.
"Local banks, of course, have all taken a keen interest in FATCA and the outcome of the ongoing dialogue between the Internal Revenue Service, other US authorities and foreign financial institutions (individually and through their national industry associations). Individual institutions are making plans to assess the likely cost and operational impact once the detailed regulations and requirements to give full effect to FATCA have been settled and established," added the JBA president's response.
Bowen, who is also president and chief executive officer of Scotiabank Jamaica, which is ultimately owned by its Canadian operations, revealed that banks have already invested significantly in addressing FATCA concerns.
"The vast majority of Jamaican banks are either subsidiaries or branches of North American banks. The parent banks of these local banks have invested significant resources in examining FATCA and its potential impact on their global operations, Jamaica included," Bowen said.
As such, he said, "These entities, individually and collectively through industry groups (for example, the Canadian Bankers Association), have been providing the relevant US authorities with feedback on the various requirements that have been proposed by the US Internal Revenue Service which is intended to give effect to the legislative provisions contained in FATCA," he said. "Local banks, for their part, have been in dialogue with our local regulator, the Bank of Jamaica on this matter."
Steven Jackson, Business Reporter
This article was originally published in the Jamaica Gleaner on Wednesday, July 20, 2011.
