Crown Dependencies meet UK Treasury officials on ‘UK FATCA’
From Tax & Regulation Nov 30 2012 BY: Helen Burggraf , Contributing Editor , International Adviser
The Governments of Jersey, Guernsey and the Isle of Man issued statements late this afternoon saying that they had met with UK Treasury officials about the possibility of extending the principles behind FATCA “to an exchange of information” with Britain.
Until the statements were issued, beginning around 5pm London time, the fact that such a meeting was being planned had been confirmed, but it was not known when or where it would take place.
As reported, news that the UK government was contemplating a ‘son of FATCA’ aimed at obtaining information on all accounts held by British taxpayers in Britain’s overseas territories, including the Crown Dependencies, Gibraltar and the Cayman Islands, emerged in a report last Friday in International Tax Review (ITR)
ITR, which coined the phrase ‘son of FATCA’ to describe the scheme, said it had seen a copy of a leaked draft of a government document detailing how it would work.
Formally known as the US Foreign Account Tax Compliance Act, FATCA was signed into law in 2010 by President Obama. It requires all foreign financial institutions to provide information to the US Internal Revenue Service on all American taxpayers’ overseas holdings, beginning mainly in 2014, although some reporting has already begun.
The joint statement issued this afternoon by Jersey chief minister Senator Ian Gorst and Guernsey Chief Minister Deputy Peter Harwood noted that “an explanatory meeting” had been held “with HM Treasury officials this week to understand better the UK proposals”, with further discussions “expected”. The details of the meeting, including exactly when it took place, were not given.
“The UK and the Crown Dependencies share a common commitment to combat tax evasion and to participate generally in international efforts to combat financial and other crime including fiscal crime,” the five-paragraph statement:
“30 November 2012
“The Chief Minister of Jersey, Senator Ian Gorst, and the Chief Minister of Guernsey, Deputy Peter Harwood, have issued the following joint statement:
“The Crown Dependencies are well advanced in their negotiations with the USA regarding the Foreign Account Tax Compliance Act (FATCA) and are awaiting the publication of the final US Regulations promised before the end of the year.
“Reflecting the interest being shown by the OECD and the EU in the wider application of the principles behind the US FATCA arrangements, the UK has approached the Crown Dependencies and the Overseas Territories with a view to the principles being applied to an exchange of information with the UK.
“Officials of the Crown Dependencies held an exploratory meeting with HM Treasury officials this week to understand better the UK proposals. Further discussions are expected.
“The UK and the Crown Dependencies share a common commitment to combat tax evasion and to participate generally in international efforts to combat financial and other crime including fiscal crime.”
Isle of Man chief minister Allan Bell issued his own statement*, which was longer, and which sought to set the concept of a ‘UK FATCA’ in context with recent and ongoing global moves towards greater information exchange.
Noting that he had “made reference” to a “move towards automatic exchange of information becoming the new global standard in international tax co-operation” in comments last month, Bell, who prior to becoming chief minister in 2011 had been the island’s treasurer for almost a decade, said this movement “involves the G20, the OECD, and the EU, as well as FATCA…and not surprisingly, we have been discussing the implications of all this with the UK and with our fellow Crown Dependencies in the Channel Islands”.
“This week’s meeting of Crown Dependency and UK Treasury officers was part of the ongoing dialogue,” Bell said.
‘I explained in October that FATCA requires automatic collection and sharing of tax-related information with the US authorities, and that it was likely that other nations would look for similar arrangements. I repeat now what I said last month: We need to respond to these changes, not simply because it has been our long-standing policy to meet established international standards, but because a failure to do so will damage our economy in the medium to long term.
“The Isle of Man has achieved global recognition for its compliance with current international standards of tax co-operation. The Island has never had bank secrecy laws and was one of the first countries outside the European Union to automatically share bank account information with EU member states.”
Hours before the news of the meeting between the crown Dependencies and the UK, meanwhile, a Channel Islands news website published the comments of one of Guernsey’s best-known experts on tax, Ernst & Young partner Graham Parrott, who it quoted as saying that a ‘Son of FATCA’ regime could end up simply driving business away from British-linked offshore centres, including the Channel Islands.
“And if the reporting requirements are extended to UK-resident but non-domiciled individuals (non-doms), then that could have an even greater impact,” Parrott told the news website, businesslife.co.
“It would be ironic in that case that the affected businesses in the Crown Dependencies, or whichever places this is to apply to, would have to provide more information than the non-doms themselves are currently required to do.”
Parrott went on to note that because the new law would cover some of the same areas as the EU Savings Directive, which already requires that Guernsey and the Isle of Man share information on UK taxpayers with HM Revenue and Customs (HMRC), Jersey would have more to lose from a ‘Son of FATCA’ as it is understood to have been proposed than Guernsey.
This, Parrott told businesslife.co, is because Jersey has no automatic information exchange, so “the change in Jersey as far as this UK reporting is concerned would be greater”.
Perhaps most frustratingly for Channel Islanders, though, ‘Son of FATCA’ appears to be driven more by politics than by hard and fast data about how best to raise revenue, Parrott told business.co, adding that this is “exactly what happened around the removal of low-value consignment relief” – a recent UK crackdown on a “loophole” seen as undercutting UK businesses.
“While much of this business has gone elsewhere [from the Channel Islands since the change in the regulations], the clamour has died away,” Parrott said.
For more on this story go to:
*Discussions continuing over FATCA implications
DISCUSSIONS are continuing over the wider implications of the US FATCA (Foreign Account Tax Compliance Act) legislation requiring automatic exchange of tax information, Chief Minister Allan Bell MHK said today.
Mr Bell confirmed that there were discussions this week between the Crown Dependencies and HM Treasury about the potential for similar arrangements with the United Kingdom.
The Chief Minister said:
‘The issue of FATCA and its implications is not a new one. I made reference to it in my Agenda for Change statement to the October Tynwald when I spoke of a move towards automatic exchange of information becoming the new global standard in international tax co-operation. This movement involves the G20, the OECD, and the EU, as well as FATCA in the US, and not surprisingly we have been discussing the implications of all this with the UK and with our fellow Crown Dependencies in the Channel Islands. This week’s meeting of Crown Dependency and UK Treasury officers was part of the ongoing dialogue.’
The Chief Minister continued:
‘I explained in October that FATCA requires automatic collection and sharing of tax-related information with the US authorities, and that it was likely that other nations would look for similar arrangements. I repeat now what I said last month: We need to respond to these changes, not simply because it has been our long-standing policy to meet established international standards, but because a failure to do so will damage our economy in the medium to long term. The Isle of Man has achieved global recognition for its compliance with current international standards of tax co-operation. The Island has never had bank secrecy laws and was one of the first countries outside the European Union to automatically share bank account information with EU member states. The Isle of Man led the way by assisting the OECD to develop its model Tax Information Exchange Agreement a decade ago. Since then the Island has gone on to sign more than 30 such agreements with countries around the world.’
The OECD confirmed in a report to the G20 meeting last year its view that the Isle of Man was one of only a few jurisdictions with all the elements of effective tax information exchange in place.
At the same time the Financial Stability Board placed the Isle of Man in the highest category of co-operative jurisdictions strongly adhering to international standards of co-operation and information exchange.
