October 24, 2020

BUSH IN TAX TALKS

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Hon McKeeva Bush

Premier McKeeva Bush hopes to meet US tax authorities in March to discuss Washington’s efforts to elicit account information from local banks and tap thousands of island residents for money.

Opening a seminar on US tax compliance on Tuesday evening at Family Life Centre on Walkers Road. Mr Bush conceded that times were tough, but “as a country, we will get through this,” warning anyone subject to US taxes “that you have much to contemplate and many decisions to make”. Described by one tax adviser as “the mother of all
fishing expeditions”, Washington’s Foreign Accounts Tax Compliance Act (FATCA) and the Internal Revenue Service has set 2014 as a deadline for millions of US-affiliated people to file -and pay – income tax.

The 200-member audience heard that “affiliated” meant far more than citizens and passport holders: Anyone with a Green Card, with US property, a business, a bank account, with authority for a US account – whether power of attorney or merely a signature – or a dual citizen is liable. Anyone who spends a minimum amount of time in the US – whether for medical treatment, holiday, business or otherwise – or owns stocks, bonds or other financial instruments, anyone born of US parents, whether they or their parents are resident or not in the US is liable.
Listeners heard that liability extends even to ‘accidental’ citizens, described by one adviser last night as someone whose mother may have suffered complications during pregnancy and gone to the US to give birth “and the child never spent another day in the US”.

“We think we may be able to get a change in that,” he said, conceding, however, that, for now, it remained law.The FATCA efforts, widely acknowledged to result from trillion-dollar US budget deficits, were launched in March 2010, seeking to recover money in overseas
bank accounts.

Already the Union Bank of Switzerland has suffered heavy financial penalties and given up its list of US account holders. Washington is similarly threatening banks worldwide with a 30% withholding tax on their US assets if they fail to report. In some cases, banks have refused US deposits because of potential liabilities.

A financial services adviser to government, requesting anonymity, said Tuesday that Mr Bush hoped to meet US Senator Carl Levin, who has led both FATCA and “anti-tax
haven” legislation.

The Cayman Islands was the first foreign government to meet US tax authorities on FATCA, he said, and had raised the “accidental
citizens” subject.

“We acquitted ourselves very well,” he said, pointing out that Cayman already had extensive tax agreements with the US, and that new laws demanding greater disclosure could threaten Cayman Islands laws limiting release of information.

“We are hoping we may be able to change it so [disclosures] are government-to-government, rather than local institutions-to-government,” he said.

US tax attorneys and accountants Shawn Wolf, former Cayman Islands resident Patrick Hackenberg and Martin Karges addressed Tuesday’s audience, detailing what is expected under the new laws.

“One bad apple has spoiled the bunch,” Mr Wolf said, echoing Mr Karges description of the requirement on all US-affiliated persons to file notice of their foreign bank accounts. If the aggregate value of those accounts reaches US$10,000, the US Treasury demands a report.

“They are not just looking for tax evaders,” Mr Wolf said, “but are after the guys laundering money or the next Al-Qaeda general moving money around outside the US.

“You may not be Al Capone, but they want to know you’re not Al Capone,” he said, alluding to the notorious 1920’s Chicago gangster, ultimately jailed for tax evasion.

Advising the audience to consult tax experts, the three said some exemptions applied to overseas earnings, but were hemmed in by regulations regarding an individual’s circumstances, including intentions, timing, physical location and
marital status.

Depending on those details, penalties ranged from $10,000 per year per bank account to imprisonment to $100,000 fines.

“As a general matter,” Mr Wolf said, “if you have never filed, you need to go back six years in your records, and there is some discussion now of eight years.”

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