THE Government of Guyana has said it will soon enter into an agreement with the United States to exchange information aimed at stopping tax evasion by Guyanese holding bank accounts in the U.S. and by U.S. citizens holding bank accounts in Guyana.
The related measure is known as the Foreign Account Tax Compliance Act (FATCA), and Finance Minister Winston Jordan addressed the imminent arrangement under the head of Financial Reform in his 2015 budget presentation.

FATCA is generally regarded as the beginning of the establishment of a central worldwide clearing house for the exchange of taxpayer information amongst countries. FATCA was instituted by the United States of America in 2010 to combat tax evasion by U.S. individuals holding investments in foreign accounts.

In his budget presentation, Minister Jordan said Government has indicated its intention to sign the FATCA Model 1 Reciprocal Intergovernmental Agreement (IGA) with the U.S.
A reliable source has said that this version of the model IGA calls for reciprocal exchanges of information. However, it is generally available only to jurisdictions that meet two tests. First, the country must have in place a tax treaty or a tax information exchange agreement (TIEA) with the U.S.
Second, the country must have in place protections and practices that are determined by the U.S. Treasury Department and the Internal Revenue Service (IRS) to be sufficiently robust to ensure that the exchanged information remains confidential and is used solely for tax purposes.

Guyana is expected to satisfy these two conditions.

The source said there is another version of the IGA, namely version 2, the non-reciprocal version, which provides for a country reporting only to the U.S. and no reciprocity by the U.S.

However, Guyana, according to the minister, will choose the reciprocal version.

In his budget presentation, Minister Jordan said the Guyana Revenue Authority (GRA) has been identified as the competent authority to receive and submit the financial information of customers identified as U.S. persons by the reporting institutions, such as local commercial banks. This information will be sent by the GRA to the United States Inland Revenue Service (USIRS).

The minister said the reporting institutions, particularly the local commercial banks, have already begun the process of registering with the USIRS as compliant foreign financial institutions, and are putting in place measures to ensure compliance with all reporting requirements.

The FATCA was passed in the U.S. in 2010 after that country had found itself losing an estimated $100 billion in tax revenues every year due to offshore tax abuses by its citizens. An FFI which enters into an arrangement with the USIRS is referred to as a Participating Foreign Financial Institution (PFFI). In Guyana, local banks, credit unions and insurance companies are considered potential PFFIs.

PFFIs will be required to examine their existing accounts to determine who are U.S. citizens, identify such new account holders, provide annual reports on them, and withhold payments to account holders who refuse to disclose relevant data.

PFFIs which do not enter into an agreement with the USIRS will be considered Non-participating Foreign Financial Institutions (NPFFIs), and, according to the IGA, registered PFFIs will be expected to refuse to conduct business with NPFFIs.

The PFFIs will also be empowered to withhold any payments due to NPFFIs.

The source said that the U.S. Treasury has entered into IGAs with a number of countries to facilitate the transfer of information. He explained: “Now Guyana, through the Finance Minister, has indicated its willingness to support FATCA.”

By Clifford Stanley