Lobbying against FATCA on Capitol HillSaturday, February 18, 2017
The countries of the Caribbean Community (Caricom) are facing a major challenge of executing international payments as foreign banks reduce and/or eliminate correspondent banking services to some financial institutions in this region.
This situation has been brought about by the passage by the United States Foreign Account Tax Compliance Act (FATCA) in 2010, the intention to increase tax revenue from US citizens with foreign bank accounts and investments and reduce money laundering.
To ensure compliance with FATCA, banks are required — on pain of penalties — to report information to the US Treasury. In order to avoid penalties, US banks have reduced services to some banks in the region, giving rise to the term "de-risking".
The Caribbean has been particularly hard hit and could suffer even more, arising from the fact that international financing affects trade, investment, credit card payments, debt servicing, and remittances. These are the very economic lifeblood of Caribbean economies.
The Caricom heads of government, through Antigua and Barbuda Prime Minister Gaston Browne, announced that the community is considering hiring a US firm to lobby the Trump Administration and Congress on FATCA.
The governments of the Caribbean have never fully appreciated the value of the services of lobbyists. Jamaica and Trinidad and Tobago employed lobbyists briefly in the early 1990s to lobby on the trade benefits of the Caribbean Basin Initiative. The foreign ministries fought to eliminate fees for lobbyists because the payments came from their budgets. They argued that they could do the job through their embassies.
The last time Caricom hired a lobbyist was during the fight to preserve the European Union preferential regime for bananas. The US and Latin American producers succeeded in dismantling the regime through the World Trade Organization. The US could not be persuaded to desist after Chiquita made a large donation to the Bill Clinton presidential re-election campaign, as well as to the Republican party whose losing candidate in that election was Bob Dole.
Now, the Caricom heads of government obviously think that their current representatives cannot do the job and hence they need a lobbyist. There are three questions: Do we need a lobbyist? Who will pay the lobbyist? Who should be the lobbyist?
It is also reasonable to ask why do we need a lobbyist if we have ambassadors and fully staffed embassies. What are they doing? Should they be spending less time on the social circuit and more time on Capitol Hill?
The Caricom leaders are apparently expecting the banking sector to pay for the services of a lobbying firm. Good luck with that, since it is the smallest banks that have suffered the greatest loss from FATCA, while the large locally owned banks and subsidiaries of foreign-owned banks are largely unaffected.
Interestingly, the front- runner for the lobbying contract is a firm headed by former US Attorney General Eric Holder, a democrat and black American with one immigrant parent (Barbados) who would have been part of the US apparatus for enforcement. Perhaps there is some sense in that. Who better to deal with FATCA than he who enforced it?
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