Sun | Apr 30, 2017

Editorial: Europe's black list and FATCA

Published:Thursday | July 16, 2015 | 7:00 AM

The Caribbean Community (CARICOM) had every right to be outraged - as was expressed by its leaders at their recent summit in Barbados - over the decision by the European Union (EU) to name and shame eight of its members for supposedly failing to cooperate against the use of their territories as tax havens.

Europe's action, however, should be a reminder to Jamaica of the muscle of the powerful and of its own need for the timely implementation, and clear articulation of arrangements to which it has agreed, lest its financial institutions find themselves having to fend off similar attacks. We, in this regard, point to obligations under an agreement Jamaica signed with the United States to accommodate America's Foreign Account Tax Compliance Act (FATCA).

Quite understandably, the world has grown increasingly concerned at the use of offshore financial institutions by individuals, corporations and other bodies to stash money. It is a way for some people to dodge taxes at home. But it is also a means by which money can be laundered to the benefit of criminals and assorted terrorists.

In that regard, this newspaper is broadly in favour of the multinational effort to bring greater transparency to global financial transactions even if the measures are often intrusive and sometimes insensitive to the implications for small, vulnerable economies like those in the Caribbean. That, we understood, was also the position of CARICOM.

The burden or reform, however, cannot be borne only by countries like those in the Caribbean.

It is against that background we were surprised at the EU's listing of the CARICOM members - Antigua and Barbuda, Bahamas, Barbados, Belize, Grenada, St Kitts and Nevis, St Vincent and the Grenadines and Montserrat - as well as associate members Anguilla, British Virgin Island, the Cayman Islands and the Turks and Caicos Islands.

Indeed, as the CARICOM leaders retorted in their communique, their countries have worked "to comply with the onerous and unilateral measures" of the Organisation for Economic Cooperation and Development (OECD) on tax cooperation and information exchange. Significantly, the OECD has not, in recent times, complained about the behaviour of CARICOM's members.

 

WARNING TO JAMAICA

 

Perhaps there was motive other than bureaucratic misspeak for this potentially harmful European blunder. We hope not.

Yet, it is a warning to a country like Jamaica that it can't be too careful in ensuring that it keeps its bargains and does so in orderly fashion.

Several months ago, Jamaica signed an agreement with the Americans to tell the United States (US) tax authorities, as required by FATCA, of US citizens and residents who have accounts of US$50,000 or more in Jamaican financial institutions. It is part of efforts by the Americans to close tax loopholes, but the agreement also has the prospect of reciprocity for Jamaica.

While it's clear what information the US authorities require, Jamaica's central bank has the responsibility of drafting the rules for how it is to be collated and delivered by domestic financial institutions, so as to comply with national laws. The Bank of Jamaica has been slow, some institutions complain, in completing the job.

The issue here is that, if the systems are not in place by September 30, the agreement will lapse, and no one is clear what will be the attitude of the Americans and the consequences for Jamaican financial institutions.