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By Kiana WilburgFor years,Wholesale NFL Jerseys, Governments around the world have tried to prevent major players from evading taxes. To avoidShawn Naughtoncertain measures attached to reporting their wealth, some persons have resorted to placing their ill-gotten wealth in accounts outside of the country.This is the very situation before tax chiefs in countries like Guyana and global superpower, the United States of America (US). Acknowledging that international ways of hiding money, lawfully and unlawfully attained, and evading taxes, call for international ways of stopping it,Wholesale NFL Jerseys, the US in 2010 implemented the Foreign Account Tax Compliance Act (FATCA).In this series, I will share with you an extract of my interview with Chartered Accountant Shawn Naughton, who has a firm understanding of how FATCA works in fighting tax evasion and how Guyana stands to benefit from signing on to the agreement.Naughton has written on the issue extensively, in particular his publication called, “FATCA; Guyana’s Pilot into International Tax”.   He has always been concerned about the tax revenue being lost to Guyana. The following are our exchanges: Kaieteur News (KN): You have written on FATCA extensively. What is the main objective of your financial publication?Shawn Naughton (SN): Guyana has a few international tax agreements and as such Guyana remains isolated from the world in regards to sharing and obtaining international tax information. The main objective of my article is to let our citizens know about FATCA so they will know how it may affect them; as well as how the USA is benefiting from international tax and how Guyana can also benefit by making sure international income is properly taxed here in Guyana.KN: Could you explain for our readers, what FATCA is?SN: Sure. FATCA is an international tax tool for improving compliance by US taxpayers with the tax laws of the USA. The US tax laws provide that all its citizens and resident taxpayers are to be taxed on their worldwide income.The problem with this law is both with voluntary compliance and enforcement.   Typically, US taxpayers would report income earned on assets situated in the USA to the IRS, but would not report income they earned and assets they hold, in say Barbados, to the IRS. This might be because the taxpayer is unaware of his obligation to report his worldwide income and assets. It could also be because he is aware that should he not report foreign income and assets, the IRS would find it near impossible to find out about such unreported income and assets.FATCA, as an international tax tool, attempts to get the needed information directly from foreign revenue authorities, such as the GRA, which receives the FATCA information from financial institutions, in which the taxpayers with some ties to the USA have deposited income.KN: So FATCA provides alternatives to getting the needed information should foreign income and assets not be reported by US taxpayers?SN: Well, yes and no. FATCA does provide an alternative source of the needed information. The information is however to be received by the IRS (from the foreign revenue agencies and/or financial institutions) whether or not the foreign income/assets are reported by the taxpayer. This allows for the cross-checking of information received under FATCA with that reported by the relevant taxpayer.Simply stated, the USA wants information on foreign assets held by its taxpayers. The USA will also be able to better locate its taxpayers as a result of information received under FATCA. From this information, the USA will be able to determine which taxpayers have not been reporting all of their income and assets. This knowledge could then lead to the relevant persons being assessed to additional taxes and associated penalties by the IRS.KN: Guyana has many US citizens living and doing business here for years.   Would these persons and their businesses be affected by further taxing?SN: It is expected that FATCA will identify over eight million US citizens who reside outside of the USA. Under the tax laws of the USA, these persons are responsible for paying taxes on their worldwide income which, of course,NFL Jerseys China, includes income earned in Guyana.If the persons you refer to were not complying with this requirement, they could be assessed to additional taxes and associated penalties (for non-compliance) by the IRS.   It should however be noted that some businesses are recognized as separate from the (US) persons who own these businesses. Such entities are not likely to be subject to US tax, as these entities would be resident for tax purposes outside of the USA.Put another way, the person could be a US tax person while the entity he owns is a resident of Guyana. Note that whether the entity is considered separate from its owner has nothing to do with whether it was incorporated as a company. This could be a technical point,Cheap NFL Jerseys, and tax-legal advice may need to be sought. If the entity is not considered separate from its owners,Cheap Jerseys China, then the IRS could assess the owners further as a result of income earned by the entity.KN: If US citizens who reside in Guyana already pay taxes to the Guyana government, how is it that the US can tax these persons further?SN: The USA reserves the right – under its laws – to tax its citizens and US tax-resident persons on their worldwide income, whether or not these persons have already been paying taxes in other countries. In the case of these taxpayers, the US would effectively ‘tax-up’. If the US calculates the tax on the worldwide income (say US$100,000) of one of its citizens at US$35,Cheap Jerseys,000 while that taxpayer paid tax of US$30,000 on the same income in Guyana, the difference of US$5,000 will be payable to the USA.The effect is that US citizens and/or tax-resident persons will pay tax of US$35,000 on this level of income, regardless of whether it is earned in the USA or in some other country. Remember that as US citizens, when in trouble, can call on the US government for assistance wherever in the world they reside.KN: What effect would FATCA have on Guyana?SN: Not just Guyana, but all countries are required to supply the USA with certain information about taxpayers who have some connection to the USA. In the case of Guyana, this would be by GRA forwarding the information to the IRS (after collecting the information from local financial institutions).In the case of North Korea, because that country does not agree to comply with FATCA, financial institutions in that country would forward the information directly to the IRS.   Because data/information protection is usually a legal issue, many countries will have to make changes to their laws to facilitate FATCA compliance.Put in a nutshell, FATCA could be a significant investment, especially for smaller countries. However, if a country does not comply, its financial institutions and businesses receiving payments from US sources are subject to a significant mandatory FATCA penalty of approximately 43 percent ($3 on each $7 of payment).KN: Do you have any specific concerns about FATCA as it relates to Guyana?SN: There is a move towards international cooperation in tax matters globally.   Assisting the USA with the enforcement of FATCA is one small example of this cooperation.Countries should however be allowed to decide on what assistance they can offer (given the investment involved) without having to pay a penalty for not being able to comply.   FATCA requires that $3 of every $7 of relevant deposits, made into a financial institution that is not FATCA-compliant, be paid to the IRS by its taxpayers. There is no such withholding in the case of deposits into FATCA-compliant institutions giving these institutions a significant advantage.My second concern relates to reciprocity of intended benefit under FATCA. This is where, for example, GRA agrees to forward US taxpayers’ financial information to the IRS and the IRS agrees to do the same for Guyana as it relates to Guyanese taxpayers. This information is the first step in helping GRA to verify that Guyana’s taxpayers are properly reporting money held outside of Guyana.KN: So would Guyana be able to receive information about its elusive taxpayers? Will we benefit greatly if we sign up to this arrangement? And what are we required to get done in order to be eligible for this?(The answer to that question and more in next Sunday’s Edition) Caption: Chartered Accountant, Shawn Naughton
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