Pinder identifies best tax compliance model

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Model I Inter-governmental Agreement for reporting under the US Foreign Account Tax Compliance Act (FATCA) provides the “greatest level” of preferential treatment in terms of exemptions for key Bahamian products, Financial Services Pinder Ryan Pinder said yesterday, noting that Model I should result in lower costs and reporting burdens to Bahamian Foreign Financial Institutions (FFIs).

During a communication in Parliament yesterday Mr Pinder said: “While Model I requires that a reporting infrastructure be developed within the Competent Authority, such an infrastructure may be necessary in the long run given international developments in tax cooperation. Additionally, the Government has been advised that establishing such a report infrastructure should not be prohibitively expensive.”

Mr Pinder said that while both the Model I and Model II agreement “pierce the veil of confidentiality” with the aim of facilitating tax compliance with a foreign tax authority, the Model I agreement “provides the greatest control for The Bahamas Government and its financial institutions over interactions between the IRS and Bahamian financial institutions. Model I further ensures that the directives for FATCA compliance is based on Bahamian implementing law.”

FATCA was signed into United States law in 2010 through the US Hiring Incentives to Restore Employment Act.  FATCA came into force on 1st January, 2013 and has the effect of imposing new reporting requirements on financial institutions throughout the world to the United States Internal Revenue Service (IRS) with respect to certain information on US persons and requires non-US entities to provide specific attestations about any US owners.  Financial institutions that do not comply with the FATCA requirements face a 30 per cent withholding tax on all of their US payments and will be deemed a “non-Participating Foreign Financial Institution”.

Mr Pinder noted that FATCA has far reaching implications on financial institutions throughout the world and will require significant expense and training for financial institutions.  FATCA compliance can be achieved by FFIs entering into agreements individually and directly with the IRS; or alternatively, where a country’s laws prohibit financial institutions from entering into such agreements, the government of that country may enter into an Inter-Governmental Agreement (IGA) with the United States Government. Mr Pinder said: “Under a Model I Intergovernmental Agreement, the government enters into an agreement with the United States whereby the Competent Authority, in our instance the Ministry of Finance, would be responsible for directing its financial institutions (as defined under FATCA) to compile the relevant information.  The government would then be responsible for collecting this data electronically from the relevant financial institutions.  The Competent Authority would be obligated to report that data to the Internal Revenue Service (IRS) annually. Model I includes reciprocal and non-reciprocal versions.  In the reciprocal version of the agreement, the United States undertakes to provide equivalent information to the partner jurisdiction on the tax payers of the partner country that have accounts in the United States. In the non-reciprocal version of the Agreement, the information flow is one way – in this instance, from The Bahamas to United States,” said Mr Pinder.

Mr Pinder noted that the Government has also agreed to the establishment of an inter-Ministerial committee on FATCA under the leadership of the Ministry of Financial Services be established to prepare an implementation strategy for FATCA, inclusive of the draft FATCA Agreement; to prepare and issue a Request for Proposals (RFP) for the development and implementation of a FATCA reporting system; and to oversee all aspects of the implementation of The Bahamas’ FATCA compliance. The committee will also oversee the necessary legislative reforms.

Comments

Reality_Check says...

Watch out for this Pinder fella. Many in our community are suspicious that he and his father are agents of the U.S. government. Some say his father's former Eastern Road home was well bugged by the U.S. government before it was leased to the Chinese Government.

Posted 13 August 2013, 5:10 p.m. Suggest removal

herecomestheboom says...

yes and hubert was a CI to the US.....

Posted 13 August 2013, 7:52 p.m. Suggest removal

scarletplum says...

@Reality_Check Stop hatin' on the boy. He generally makes plenty sense. Might end up being the first white Prime Minister of a post independent Bahamas.

Posted 13 August 2013, 8:30 p.m. Suggest removal

aloethree says...

who is really in control?? every public service department is inefficient, leaders are making bad decisions, believe it that most of these decision makers have dual citizenship or enough money in the Bank that if/when they frig up the country with bad choices they just hop on a flight to US,Canada or some other foreign place. Leaving the country in a ruckus. Cant we progress and prosper as Bahamians?

Posted 13 August 2013, 10:15 p.m. Suggest removal

FACTSPOLICE says...

Agree with "Reality check" and aloe three. WHAT MORE CAN YOU EXPECT! Anyone associating themselves with the likes of the PLP are nothing but opportunist crooks, looking to advance their own personal agendas! God is in control, and he makes the final call. None of these people would vote based on facts, they vote based on "What I got", All for me baby" syndromes! This country is so sickening, many weep for it this moment! WAKE UP PEOPLE!

Posted 13 August 2013, 11:48 p.m. Suggest removal

leonardo85 says...

The Bahamian government needs to weigh the pros and cons of the proposed Model I agreement. When it comes to tax matters many complications could arise, so one has to be aware of the tax laws. If you hire a financial service provider then they could take care of the matters, in New Jersey for example, you can rely on Frazer, Evangelista & Company, LLC for your tax related issues. You can find them online also at <a href="http://www.frazerevangelista.com/">http://www.frazerevangelista.com/</a>.

Posted 16 January 2014, 6:24 a.m. Suggest removal

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