SVG to implement EC$501,000 US tax evasion prevention system

The governments of the United States and St Vincent and the Grenadines have signed an agreement which will see the implementation of a system that transfers the financial information of US citizens holding assets in this jurisdiction, in a move to curb tax evasion.{{more}}

The Foreign Account Tax Compliance Act (FATCA), which was introduced by the US Treasury Department in 2010, has seen the SVG Government spending some EC$501,000 in initial set-up costs, and it will further incur $114,000 annually in maintenance and operational costs.

At the signing, which took place last Tuesday, August 18, Prime Minister Dr Ralph Gonsalves said that the Bill will be put before Parliament and brought into law in time for the September 30 deadline established by the US.

“It’s not that we have a loaded gun to our heads; it is that the US government has taken a particular public policy in relation to its internal revenue condition and situation,” said Gonsalves. “We respect that… and we are complying, let’s face it, because there would be adverse consequences if we don’t comply.”

FATCA requires Foreign Financial Institutions (FFIs) to report to the US Internal Revenue Service (IRS) any information they hold on accounts held by US citizens (or any entity in which US citizens hold substantial ownership interest) valued at US$50,000 or more.

Through a mandate from the CARICOM Task Force, the Eastern Caribbean Central Bank has spearheaded the preparation of the eight ECCU member states for the implementation of this tax exchange system.

Despite the necessity of putting the system in place, the Prime Minister said that the main drawback of this Inter-Governmental Agreement is that it uses Model 1B – a “non-reciprocal” exchange of financial information.

“The preferred model is the reciprocal IGA model A. This option is not open to St Vincent and the Grenadines at the moment, or indeed to the Currency Union countries,” lamented Gonsalves.

“Notwithstanding this, the USA has indicated that at a subsequent time, it would be willing to enter into tax information exchange agreements with those jurisdictions which do not already have an already established tax information exchange agreement – thereby enabling those jurisdictions to sign the IGA model 1A.”

According to the Prime Minister, the Competent Authority for FATCA in SVG has been designated to the Comptroller of the Inland Revenue Department, Kelvin Pompey.

Pompey, who also gave brief remarks at the signing, said that an Exchange of Information Unit (EOI) has been established within his department to accommodate the additional duties the new tax exchange system will generate.

This EOI includes the comptroller, a deputy comptroller of operations, a senior legal officer, an IT administrator, an IT officer and a compliance officer.

“I am pleased to report that the department is on stream in making the necessary preparations for the implementation of FATCA reporting exercise,” he relayed.

Larry Palmer, Ambassador at the Embassy of the United States of America to Barbados, the Eastern Caribbean and OECS, also expressed his pleasure at the signing of the agreement, and thanked the Prime Minister for his support.

Describing the information exchange as “top priority” for the US government, Palmer said: “Access to information from international financial institutions is critically important to the full and fair enforcement of US tax laws. Every year, tax evasion deprives governments of all sizes of much-needed resources to fund public services and investments.”

He further noted that cooperation between governments to eradicate offshore tax abuses would lead to a “stronger, more stable and more accountable global financial system.”

Under FATCA, local financial institutions will be required to file financial information on customers – through the Competent Authority (the Inland Revenue Department) – by September 30 of each year.

The Competent Authority will also provide local financial institutions with information on procedures for filing, as well as training on the use of the new software procured for FATCA reporting. (JSV)