Tax Havens Snub ‘Son Of FATCA’

Secretive financial haven ministers are snubbing an agreement with the British government that would allow a two-way flow of information between tax authorities.

Dubbed ‘Son of FATCA’ after a similar controversial law in the US, the Jersey and Guernsey governments have declined to sign an agreement that would make them automatically reveal who is holding an account with their financial institutions to British tax authorities.

The Isle of Man has already signed up to the agreement, which is based on the US Foreign Account Tax Compliance Act (FATCA), which compels foreign financial institutions (FFI) to handover information about US residents holding accounts with them.

The UK was one of the first countries to sign up to FATCA, but rather than automatically share information – which in many countries would contravene data and privacy laws – they agreed to swap information on a request-only basis.

However, all FFIs have to register with the US Internal Revenue Service to comply with the act.

Financial crime

After signing the agreement it became clear that the UK was looking to introduce a similar agreement with Crown Dependencies and territories – dubbed the ‘Son of FATCA’.

But the agreement with Jersey and Guernsey has hit an impasse as both islands say they would be left at a commercial disadvantage if they did sign.

They say that any agreement should be globally regulated.

In a joint statement, the Chief Ministers of Jersey and Guernsey said that they had made it clear that neither island wanted anything to do with companies or individuals involved in tax evasion.

They added: “Along with the UK, we are committed to join international attempts to fight financial crime and tax evasion.”

Call for global treaty

Senator Ian Gorst, Jersey’s chief minister, added: “We have discussed this with the British government, but want to ensure any action they want to take for the automatic exchange of information is global rather than local. That way, all financial centres across the world must play to the same rules.”

They are now urging the UK government to mirror the intention of the US FATCA which is global in its outlook to find US taxpayers who may be using havens to hide their assets and is non-discriminatory in its approach with governments.

Some of Jersey’s financial institutions have also raised the issue of disproportionate costs in complying with the proposed new regulations.

The UK is now in talks with Gibraltar and the Cayman Islands to get them signed up to the new tax agreement.