The agreement shall ensure that notification by third parties is permitted in accordance with Article 5(3). The final responsibility for compliance remained with the FFI. Discussion Dr George asked for clarification on whether we are only talking about banks. Mr Tomasek replied that he was using banks as a shortcut. He was aware that the agreement applied to many financial institutions. The National Ministry of Finance had been talking to umbrella organizations to ensure that they could coordinate responses instead of trying to talk to each individually. Working groups and joint working groups with bodies continued to be established. There was a lot of work to be done. It cost much less than a withholding tax. From their point of view, they were therefore placed in a common model in which they were subsidiaries of other banks at the international level. It was a model that everyone was working on, so they were now in a coherent room.
A member of the committee said that the impact review related to the issue of tax arbitration. He asked whether the potential impact of this damaging agreement on our struggling economy had been considered. Regarding the potential for arbitration, Tomasek said he could provide a list of all countries that have committed to a deal with the United States. It was a pretty comprehensive list. The non-participation of financial institutions or countries that were not part of this agreement resulted in their financial institutions facing very high withholding tax. It was a global movement, and when we talked about early adoptions, it meant that the concept was accepted in all countries. Once the infrastructure was set up with the United States, there were very low marginal costs to set it up for everyone else. At the international level, we started to see a stage where countries said, “Because we have all the infrastructure, we are starting to exchange information.” There have been comments from the G20 that they support the concept of automatic exchange of information. This model brought things back to a standard approach that banks believed they could handle. U.S./FATCA Deal Mr. Luthando Mvovo, Director: National Treasury (NT), said the NT was raised by umbrella organizations when the U.S.
first announced the adoption of FATCA. They had asked the NT to negotiate in consultation with them so that it would not have to deal with it directly. A working group was set up to deal with the drafting of the agreement and to have discussed it jointly. There was unanimous agreement on this issue. The financial institutions covered included banks, long-term insurance brokers, asset managers and private equity funds, so the definition of foreign financial institutions was very broad. The President said: “Having considered the request for parliamentary approval between the Government of the Republic of South Africa and the Government of the United States of America to improve international tax compliance and implement the Foreign Account Tax Compliance Act, its annexes and the Agreement, the House of Representatives, within the meaning of Article 231, paragraph 2 of the Constitution recommends: to approve the agreement. The agreement was approved. Upcoming process The Chairperson sought clarification on the further process. A member of the commission`s staff said that the process was essentially for the ministry – in this case SARS and the national ministry of finance – to come and inform the committee about what they would agree on with a particular country before it arrived at the commission or was formally referred to the Committee.
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