The St Lucia-based Caribbean Association of Banks (CAB) yesterday urged Caribbean Community (Caricom) countries that have not enacted the Foreign Account Tax Compliance Act (Fatca) Inter-Governmental Agreements (IGAs) with the United States to do so urgently.
CAB said it fully supports the positions adopted by national bankers' associations in their efforts to have their respective governments finalise the legislation.
"CAB remains concerned about the number of Caribbean countries that do not yet have IGAs in force and therefore renews the call for Caribbean countries to enact the necessary legislation for the implementation of Fatca.
"Failure to do so, has far reaching implications for banks in terms of an increase in sovereign risk and its impact on their ability to conduct business," CAB said in a statement.
The Fatca legislation, enacted in the United States in 2010, demands that foreign banks provide information to America's Internal Revenue Service (IRS) on any customer deemed a "US person" if they have more than US$50,000.
Washington has said that the legislation aims to crack down on tax dodgers who hide hundreds of millions of US dollars in offshore accounts annually in an effort to avoid paying taxes.
In the statement, CAB warned that if a country does not have an IGA in force, "the domestic financial institutions in that territory will have to establish an individual agreement with the US Government at significant cost, which may have to be passed on to their customers.
"Failure to comply with the Act, will result in a 30 per cent withholding tax on any payment of interest, dividends, rents, royalties, salaries, wages, annuities, licensing fees and other FDAP income, gains and profits, if such payment is from sources within the United States.
"Additionally, any gross proceeds from the sale or disposition of US property of a type that can produce interest or dividends and certain foreign pass-through payments will be liable to the 30 per cent tax withholding," the CAB said.
It noted that there are some countries that have the respective IGAs in force, as at January 27, 2017 for which they must be commended. It named them as the Bahamas, Cayman Islands, St Lucia, Barbados, Curacao, St Vincent and the Grenadines, Bermuda, Jamaica, Turks and Caicos, British Virgin Islands, and St Kitts and Nevis.
In Trinidad and Tobago, the Keith Rowley Government was forced to bow to opposition demands that the Fatca legislation be sent to the Joint Select Committee of Parliament as both the Government and Opposition continue to have differing views on the legislation that must be passed with a special majority in the Parliament.
Earlier this month, Prime Minister Rowley described as "an act of desperation" the letter written by Opposition Leader Kamla Persad-Bissessar to United States President Donald Trump regarding Fatca.
In its statement, CAB said it "strongly encourages the remaining Caribbean countries which are not listed above, to ensure that their IGAs are in force by their extended deadlines in order to avoid the negative consequences of non-compliance with Fatca". (CMC)