Twelfth Global Studies Conference

Abstract

In 2010, the Foreign Account Tax Compliant Act, also known as FATCA was implemented, which called for foreign financial institutions to file an annual report to the IRS on each US taxpayer living abroad or holding more than $50,000 in assets at the foreign financial institution. American expatriates are required to file if their financial assets exceed $200,000. The US, as a center for global movement of cash imposed a 30% withholding tax on the assets of any foreign financial institution: brokerage houses, offshore banks, fund companies, insurance companies, etc., that refuse to turn over all financial details on US persons to the IRS. An additional threat of being frozen out of US financial markets loomed over non-compliant institutions. In 2013, the Cayman Islands, one of the top financial centers in the world and a global financial hub signed the US FATCA agreement. The Cayman Islands is host to 40 of the top 50 world banks licensed in the country, and as of December 2016 reported assets and liabilities at US$1.02 and US$0.98 trillion respectively. Additionally, the Island hosts the “Big Four” auditing and accounting firms KPMG, Deloitte, Ernst & Young, and Price Waterhouse Cooper. As an expatriate living and teaching at a university in the Cayman Islands, this researcher gathered information using literature reviews, descriptive statistics, and interviews with policymakers, expatriates, and financial officials to better understand America’s global tax law and the impact FATCA has on this consortium of businesses and individuals as the basis of this discussion.