The remittance business could collapse, exporters may be unable to receive payment from foreign customers and bank customers’ fees could be adversely affected if the Income Tax Amendment Bill isn’t passed by tomorrow’s deadline.
A number of potential effects on trade, travel, business and education were detailed yesterday, not by Government, but by stakeholders who spelled out what could occur if the bill isn’t passed.
The bill is designed to meet European Union/Global Forum formats to counteract tax evasion. Non-passage could cause local banks loss of correspondent links with overseas banks and see T&T being blacklisted.
T&T is on a Caribbean Financial Action Task Force (CFATF) “grey list” on the issue and also needs to pass the bill by tomorrow to meet CFATF and its parent FATF body’s deadlines.
Yesterday, local stakeholders were interviewed by a Special Select Committee (SSC) which was named in Parliament last Friday to examine the bill after the Opposition maintained concerns on it. Government named Ministers Colm Imbert (Finance), Faris Al-Rawi (Attorney General), Fitzgerald Hinds (Minister in the AG’s office) and Randall Mitchell (Tourism) to the SSC. The Opposition up to yesterday refused participation.
The committee met privately Monday and publicly yesterday with stakeholders to have views aired.
Those interviewed were Ambassador to the European Union delegation in T&T Arend Biesbroek, the Bankers’ Association of T&T (BATT), T&T Chamber, American Chamber, Board of Inland Revenue and the National Anti-Money Laundering and Counter-Terrorism group (Financial Intelligence Unit, police, Securities and Exchange Commission and Central Bank).
All supported passage of the bill.
The SSC reports to Parliament on the issue tomorrow.
If the bill isn’t passed, BATT’s Baldath Ramkissoon said the loss of correspondent banking links would make some local banking services unavailable, impacting negatively on banks, with “varying consequences at national level which could affect T&T’s wealth and Gross Domestic Product.”
Ramkissoon and BATT’s Charlotte Bellemare detailed effects of the loss of correspondent banking:
• Overall negative impact on trade and all forms of business.
• Lack of access to capital, including to pay schools fees and import food/other products - limiting what’s available on the T&T market.
• Remittances to nationals would be hit and businesses like Western Union would cease to exist locally.
• Unavailability of wire transfers needed by manufacturing exporters who may not get paid - leading to a possibility of capital flight.
• Foreign currency cash notes for North America, Eastern Caribbean.
• Travel requiring cash notes/US currency.
• Credit card settlements; increased costs of purchasing on-line/Amazon.
• Local stockbroking operations affected.
• Increase in fees banks pay, in turn impacting on customer charges for wire transfers, drafts etc.
• More audited statements will be required of banks.
Ramkissoon said correspondent bankers are keen to see the ITA bill implemented.
“They’re monitoring the situation; one of them came here recently,” Ramkissoon said, but added he wasn’t aware of any banks halting corresponding banking due to the issue.
Imbert said a Chinese bank did and a US bank’s also concerned.
BATT’s Joel Chadha said enhanced due diligence and increased uptick in some regulators’ queries have been noted.
Bellemare said BATT has so far seen a lot more “intense” scrutiny of local banks’ operations and reduction of some services offered. Banking questionnaires on “Knowing Your Customer” are becoming more detailed.
“It tells us they’re looking at T&T more carefully,” Bellemare said.
AmCham CEO Nirad Tewarie agreed the bill should be passed but maintained that two other bills which initially accompanied the ITA bill should also be passed. Acknowledging the danger of non-passage, he added that Amcham also understood the ITA alone won’t solve the problem, that the other bills are also necessary and that there were different deadlines for GF and FATF.
Tewarie also took issue with the process concerning the bill and deadlines, “when we knew well in advance we had to pass it - this doesn’t foster confidence.”
Imbert blamed the EU/GF for continually “shifting the goal posts” on the issue, saying whenever Government did compliance procedures the EU/GF added more to be done - latest, declaring free zones a potential danger for tax practices. He added that Government had wanted to sign a multilateral treaty with the GF, but they wanted the bill passed first.
Vyana Sharma, of the AG’s office Anti-Terrorism Desk, said T&T has to report on the bill by tomorrow for a FATF meeting in January and another in February where T&T’s submission will be analysed. She said T&T police must have the ability to access taxpayer information by tomorrow.
Financial Investigation Bureau’s Avinash Singh said while police can get the information currently, the bill would expedite this. FIU director Susan Francois meanwhile said T&T is currently lumped with North Korea and Iran as having deficiencies on the issue.
Ambassador: Business with Europe will be harder
Non-passage of the Income Tax Amendment Bill may make it more difficult for local businesses and the banking sector to do business with Europe and loss of correspondent banking “might eventually be one of the consequences,” Ambassador Arend Biesbroek (European Union Delegation to T&T) said yesterday.
The SCC team heard first hand from the EU representative on the issue.
Biesbroek said it was very important for a country to ensure its citizens declare income and pay the right taxes.
“The Panama Papers (revelations) showed that doesn’t always happen,” he added.
He listed several “defensive” measures in tax areas which EU states might employ if the bill wasn’t passed.
Apart from use of the European Union Fund for Sustainable Development, he said measures include increased audits for taxpayers benefitting from EU regimes, legislative measures on tax matters that could be applied by EU member states, withholding tax measures, controlled foreign company rules, limitation of certain exemptions, special documentation requirements and mandatory disclosure by tax intermediaries regarding cross-border arrangements.
“Over time, the measures could become serious as they could increase the cost of doing business,” he added.
He said it was difficult to speculate if EU banks would stop doing business with T&T and he didn’t think the measures would stop transactions, but it might mean more due diligence, additional checks and audits and the situation could become more work, making it difficult for a bank to do a transaction.
He confirmed T&T was listed among countries considered high-risk concerning money laundering and terrorist financing based on a FATF report. But he added that T&T can be taken off the list of non-complaint states provided it makes sufficient progress to become compliant and meets several criteria.