THE Governments of Guyana and the United States of America have signed the Foreign Account Tax Compliance Act (FACTA), an agreement to fight offshore tax evasion.The signing took place on Monday at the Ministry of Finance on Main Street, Georgetown. Describing the signing as “significant and historic”, Finance Minister Winston Jordan said the agreement represents the end of a long-travelled road and the beginning of a new phase in Guyana-US cooperation in tax and anti-money laundering matters.

Enacted in 2010 by the US Congress, FACTA is designed to prevent tax fraud and evasion by US taxpayers using offshore banking facilities. It creates a new regime of automatic tax information-sharing between financial institutions, and requests foreign international institutions to identity and report information about accounts held by US taxpayers in their jurisdictions.

FACTA also forms part of a global movement towards the automatic exchange of information on non-resident financial bank account data among tax authorities. The automatic exchange of information has the potential to increase transparency, cooperation and accountability among financial institutions, said Jordan; who also noted that it encourages taxpayers to voluntarily disclose all relevant information to tax authorities.

“Guyana chose to be involved in this important venture not only because it will help to reduce tax evasion in the US, but also in Guyana,” the Finance Minister stated, while adding that to fulfill the potential of FACTA as an important weapon in the fight against tax evasion and avoidance, Guyana is required to undertake several measures, which include the improving and strengthening of legislative arrangements.

He cited as an example, Guyana’s amendment of the Financial Institutions Act, Cap 85:03 Laws of Guyana, to designate the Guyana Revenue Authority (GRA) as the competent authority to act on behalf of the Government of Guyana.

“This will allow for the financial institutions to provide the GRA with customer information on reportable accounts. The sharing of information across countries is important for the enforcement of domestic tax laws. By working together to increase transparency, both Guyana and the US would be able to detect and deter abuse of the tax system in both countries. It will enable greater accountability within the global financial sector,” he said.

POSITIVE STEP
Minister Jordan declared that the signing of the FACTA agreement represents another step in the countries’ cooperation with each other to combat money laundering and tax evasion and avoidance.

He said, too, that improving financial regulations and cooperation with international regulators has become an urgent priority, as the loss of correspondent banking relationships due to de-risking has put much pressure on financial institutions in Guyana and the Caribbean region.

“Healthy correspondent banking relationships are essential because they facilitate trade, foster economic growth, (and) create avenues for growing businesses and providing access to financial services,” he stressed.

The effects of de-risking are already being felt by many countries within the Caribbean, and the Finance Minister believes if de-risking is allowed to continue, all Caribbean states can expect some level of economic instability, financial exclusion, and ultimately economic collapse.

“The implementation of FACTA, therefore, is only one aspect of Guyana’s recent efforts to strengthen the regulation of its financial sector. This year, Guyana undertook a national assessment to allow for a proactive approach to address anti-money laundering and terrorist financing. The results of this exercise will allow us to examine to what extent Guyana is compliant with the Financial Action Task Force recommendations,” he added.

The Government of Guyana, he reminded, has a pre-existing tax information arrangement with the US Government, but needs assistance with its implementation.

TECHNICAL ASSISTANCE
“Mr. Ambassador, we are not unaware of the onerous burden and the grave financial and human costs placed upon us to meet the requirements of the organisations proposing this new regulation. We will therefore require technical and other assistance if these regulations are to be implemented in a timely and efficient manner,” said Minister Jordan to US Ambassador Perry Holloway.

In brief remarks, Ambassador Holloway said the US and Guyana have been working on the FACTA agreement for just over two years, and the signing represents formalising of what has been occurring all along.

“This gives us a nice formal framework to ensure we are compliant. We welcome Guyana’s commitments to intensifying their cooperation to improve international tax compliance. Today’s signing makes a significant step forward in our countries’ (working) collaboratively to combat offshore tax evasion, an objective that mutually benefits our two countries,” said the US Ambassador.

He explained that FACTA introduces reporting requirements for foreign institutions with respect to certain accounts held by US citizens and certain foreign entities to which US persons have substantial ownership interests.

“Access to information from other countries is critically important to the full and fair enforcement of domestic tax laws. Information exchange is a top priority for the US,” he added, while noting that the US has been a leader for creating new international standards for greater transparency.

“Today, this signing of this FACTA agreement here with Guyana signals our joint commitment to building a stronger, more stable and accountable global financial system,” he said.

Ambassador Holloway said collaboration between the two countries to detect, deter, and discourage offshore tax abuses and increase transparency and enhanced reporting should serve as another example of the deep ties that bind Guyana and the US.

GRA Commissioner General Godfrey Statia reiterated that Guyana and the US have been working together over the years. However, he noted that Guyana has, for a long time, been unable to receive information from the US because the correct procedure was not followed. According to the GRA boss, “You have to comply with the system.” He said there must be compliance with the process.

In the past, Guyana would have sent requests to financial institutions directly, as opposed to sending requests to the Internal Revenue Service (IRS) of the United States of America.

“The IRS is responsible for money for the US Government, so all of our demands for information have to be forwarded to the IRS…. Prior to today, there was the incorrect procedure being used,” Statia said.

He said that when requests had been made to the GRA, information was provided to the USA. He noted that since taking office at the Guyana Revenue Authority, information was requested, and same has been provided.

“It is a question of asking for the information; I have asked for the information and I have gotten,” said Statia.