The United States Government passed the Foreign Account Tax Compliance Act (FATCA) in 2010 and has been implementing it vigorously.
FATCA requires US persons, including those living abroad, to file yearly reports on their non-US financial accounts to the Financial Crimes Enforcement Network. It also requires all foreign financial institutions to provide information on assets and transactions of US persons to the US Department of the Treasury.
The definition of US persons includes foreigners holding upwards of US$50,000 in accounts with financial institutions.
The motivation for FATCA is two-fold: First, improved tax compliance and tax revenue collection, and second, to cut off or reduce funds getting to terrorist organisations. Nothing is wrong with either motive.
But the US is inadvertently causing serious damage to the small, developing economies of the Caribbean, who are its strong allies, because of the highly open nature of their economies and their dependence on international financial intermediation by foreign commercial banks.
Many in the region, however, believe that the US action was also related to the fact that it has listed 15 Caribbean countries as tax havens. FATCA adversely affects all international financing provided by correspondent banks. Adverse impacts include choking international investment flows, trade financing, transfers of remittances, debt servicing, transfers of profits and royalties.
Some US banks have either withdrawn or restricted some of these services to 16 banks in the Caribbean in spite of FATCA compliance by Caribbean jurisdictions. There have been meetings between the US Treasury and Caribbean ministers, but the region feels that there is insufficient empathy.
Jamaica’s Finance Minister Audley Shaw made a strong statement when Caribbean finance ministers met with the US Treasury and the International Monetary Fund late last year. Prime Minister Gaston Browne of Antigua and Barbuda hosted a special conference shortly thereafter.
Recently, the leader of the Opposition in Trinidad and Tobago Mrs Kamla Persad-Bissessar did something almost unheard of by writing to then President-elect Donald Trump to remind him that in his presidential campaign he indicated that he would abolish FATCA. The Wall Street Journal took up the issue in an editorial.
Latest development is that a seminar is scheduled for tomorrow at the SUNY-UWI Centre for Governance and Sustainable Development in New York to mobilise support for a change in US policy. The strong Caribbean team includes Sir Kenneth Hall; former prime minister of Barbados Owen Arthur; Ambassador Dr Richard Bernal, pro-vice chancellor of global affairs at UWI; former president of the Caribbean Development Bank Professor Compton Bourne; and Dr Damien King of the UWI Economics Department.
Combating money laundering and terrorist financing is a goal shared by this newspaper and Caribbean governments. Suitable arrangements have to be put in place to ensure that this can be attained while allowing normality in international financing. Hopefully, the SUNY-UWI seminar will help influence the US to repeal FATCA.
We wish the team well in their mission.