Well, 1 July 2014 has come and gone, and the financial world has not yet ground to a halt!
At a jurisdictional level, I believe that the Isle of Man is coping well with FATCA. To those that would criticise that statement, I invite you to point to a competitor jurisdiction that is better positioned. Having both local implementing law in force and government guidance issued is certainly very positive.
But is FATCA nevertheless a “game changer” for businesses on the Isle of Man (For ease, when I refer to FATCA I mean our automatic exchange of information agreements with the US and the UK.)
The compliance burden that FATCA imposes can be a heavy one, particularly for those businesses that do not have the scale to develop their own in-house FATCA expertise. And it is the Island’s small to medium sized corporate service providers that arguably have it toughest of all, given how notoriously ill-suited FATCA is to the CSP world.
For years now, many CSP businesses have been diversifying away from the UK as a key market – and the US has not been an area of focus for most. Therefore, it is perhaps not surprising that FATCA (US and UK) is seen by many CSPs (large and small) as just a compliance burden that needs to be dealt with, as opposed to a real game changer when it comes to generating new business.
But what about the OECD’s Common Reporting Standard, which will (from 2016) broaden automatic information exchange– how will that impact on our CSP sector? We don’t yet know how many countries will ultimately sign up to the CRS – but it does look like it will have fairly comprehensive coverage. As such, whilst it represents another compliance burden, there may be a level playing field, of sorts, which is the best that can realistically be hoped for.
The importance of the CSP sector to the Island’s economy as a whole should not be underestimated and, as such, any initiatives that may tilt that level playing field against our CSP sector should be handled with care. As an example, the current consultation on beneficial ownership springs to mind, but comment on that is for another day…
So, in conclusion, whilst there is no doubt that FATCA implementation is painful, the Isle of Man is probably as well placed as it can be.
David Parsons, Associate Director, KPMG LLC