Liberty and justice for all United States persons abroad

The Isaac Brock Society

1,012 thoughts on “FATCA Discussion Thread (Ask your questions) Part One”

  1. *I actually wanted to highlihgt the answer I got back from the IRS by using the highlight button in the menu, but it didn’t work out 🙁
    How do you do that???

  2. Regarding the recent Reuter’s story above. 

    I posted a comment, and since I don’t really know if it will show up, or not, I will record it here to use later somewhere else. 🙂

    So, Patrick, I know you are under limited resources these days at Reuters, but did you just receive two press releases and regurgitate what propaganda was put forth by Treasury without a single clarifying question? It certainly appears so.

    In the first section, regarding Ireland, it might have been helpful if you explained to your readers, that this was an agreement between Treasury technocrats. It will require modification of Ireland’s privacy and human rights laws to accept the FATCA CRAM Down that America unilaterally demands without regard to their sovereignty.

    It will then have to be approved by the Irish Parliament. So, hardly a done deal yet, as the article seems to imply. Of course, that is the impression Treasury wants to create. You bought the myth and passed it on. But, it isn’t that simple or iron clad a process.

    On the US side, no matter how Treasury tries to characterize it, they are dictating a Tax Treaty under the guise of negotiation. The only negotiation is one of capitulation by Ireland, with allowances for some very minor exemptions in Annexes to the basic FATCA demands of Treasury. To call it ‘bi-lateral’ is a total abuse of the definition of the word!

    A Treaty would normally require an “Advise and Consent” process from the Senate. However, Treasury has just unilaterally declared it an ‘Executive Agreement’, so it can by-pass Congressional due process. Will they pull it off? Maybe, if Reuter’s journalist never ask a question.

    But, then again, maybe not, as this requires imposition of a domestic FATCA (DATCA) to be imposed on U.S. banks to provide some faux face saving reciprocity to Ireland. Congress did not sign up for this when they passed FATCA.

    This action by Treasury, acting alone without Congressional approval, is repatriating the huge cost of FATCA compliance back onto homeland shores. It pretty much wipes out any supposed tax revenue gains this fiasco was supposed to create.

    As we have recently seen, the Senate doesn’t like its sovereignty violated with UN Treaties on the disabled, and they might not like the Treasury just doing what it wants by handing over information from U.S. banks to other governments with these FATCA agreements.

    In the second section of your article, on Steven Miller’s comments, you seem to just accepts at gospel his claims about the Voluntary Disclosure revenues, without a couple basic questions like:

    1. How many were the Wealthy Whales you imply all of these anti tax evasion programs are about? How many were benign collateral damage expat or new immigrant Minnows who got caught up in a net not designed for them? What was the ratio of Minnows to Whales? That answer, if provided truthfully, might surprise you.

    2. Of the total revenues collected, what was actually taxes due, and what portion was penalties? They used the 1970 Bank secrecy Act FBAR form, that few knew about until they pulled it off the shelf in 2009, as their penalty generating hammer of choice. What portion of $5.5 Billion was FBAR penalties? If it was a significant amount, it certainly will not be reoccurring tax revenue, now will it?

    Finally, you report that Mr Miller said, “he would consider merging a taxpayer’s FATCA compliance with an older, similar statute known as the Report of Foreign Bank and Financial Accounts (FBAR)”

    I would have thought a tax journalist would have immediately known that he does not have the statutory authority to do that, however a good idea it might be.

    I won’t bore you with the details, but FBAR form is under administration by FINCEN. That is a different Title Statutory authority than FATCA Form which does rest with the IRS. He can modify the FATCA form, but there is nothing he can do about the FBAR on his own, no matter how good the intention.

    It will be up to Congress to modify the 1970 Bank Secrecy Act, from hence the form comes. Then again, Treasury has been showing a lot of hubris recently, acting unilaterally without regard to the will of Congress, so maybe he thinks he can. However, I would caution him, that his title still includes the word “Acting” in front of “Commissioner”. 🙂

  3. http://www.treasury.gov/press-center/press-releases/Pages/tg1759.aspx

    I’ve sent this to 2 Senators, 1 Congressman 

     

     Has Congress given up its rights and responsibilities to make and create treaties with foreign governments? 
      The treasury has now made agreements with Ireland, UK, and Denmark, to chase down all US persons who are hiding their assets in countries with 45%-55% tax rates, without Senate ratification.
       FATCA had been designed to place the burden of discriminating against US persons upon foreign banking institutions, placing all of the compliance costs upon them.  However, now the burden is being sent back to the homeland, to reciprocally force US banks to discriminate against its immigrants.  US banks will now have to create expensive software to go through their records and pick out people who don’t belong in USA, and report them back to their home countries.
       This has already created a drain of capital from Florida.
       Senate has a choice to let the IRS and treasury make bad agreements, or to join up with Demint and Rand Paul and force the administration to take up foreign agreements in Congress.  If Congress wants to discriminate based upon nationality (US persons included), then they can vote on it.

  4. *For “a”, I find it really difficult to believe that every “US Person” living abroad and self-employed will be forking over 10% to the IRS in SS taxes.  First of all, nobody knows about this taxation issue.  I’ve spoken to several US persons in Canada and the US over the last 8 months.  They think I’m off my rocker!  “What do you mean, you have to pay taxes in the US, you don’t even live there?!!!  You don’t work there, why should you pay taxes?  You were a kid when you came to Canada.  What do you put on your tax return if you don’t work there, just zero?”  I’ve met many people that are doing absolutely nothing about this. 

  6. @Marie, the “landing” for these people is going to be hard. First, when their bank is going to ask about their ties to the US and ask them to sign a paper saying they’ll send their name to the IRS or close their account, and secondly when the IRS is going to send them a letter saying that they need to pay taxes, interest, penalties, FBAR fines, etc.

    I am really curious what the IRS is going to do with that massive flow of data they’re going to receive and how they’re going to handle it. We’ll know in about a year…

  7. Great comments @JustMe. Great points about the powers of the IRS and Treaties vs. Executive Agreements, the ACTING commissioners’ comments exceeding his authority re FBAR/FATCA merger, and the fact that the IRS is pushing further and further past their authority, and bypassing Congress (re IGAs, and DATCA). I find it crazy, that we here, who are not even US residents, have together become more conversant with some of the workings of the US government than US journalists.

    And re: “IRS Acting Commissioner Steven Miller highlighted FATCA as a “tool”
    that has compelled delinquent taxpayers with hidden assets abroad to
    enter a voluntary disclosure     program at IRS.

    FATCA has come under fire from Americans with foreign financial accounts because they are accustomed to secrecy.”

    WTF? Firstly, contrast ‘compelled’ with ‘voluntary’ in the same sentence, and figure out what that means in an official quote of an official statement by an IRS official.

    Secondly, where is the evidence for ‘accustomed to secrecy‘? Last I looked, all my accounts and assets are registered with my Canadian tax number, and other personal identification, the SIN – equivalent to the SSN, subject to layers of law, reporting, enforcement and official scrutiny in Canada, with any interest earned reported directly to the CRA, and tax slips automatically issued – resulting in tax assessment by the CRA. The article seems to imply that in every country except the US, we have no laws or KYC, or tax agencies, etc.

    Seems that you don’t have to meet any standards for accuracy or even logic as a journalist carried by Reuters.

  8. @Marie, I have no doubt that there are loads more ppl than anyone suspects who are going to  horrified when the first IRS letters begin showing up – as Christophe points out –  b/c the US has really done very little to make public their filing requirements or to let USP’s, who were born overseas or are accidental due to unfortunate place of birth, know about the issue.

    And the definition of who is a USP for tax purposes is slowly expanding, which is the whole point, imo. This is about collecting revenue in the form of fines and gathering financial information (for the gods only know what but seriously, does anyone really think that the US won’t come up with some way to use it for its own benefit?)

    I moved up here as an adult, so I never stopped filing, but it pisses me off b/c if I worked for the city I live in rather than contract my services, I could exempt my earnings and just pay taxes here and file my “zero” with the IRS.

    This is going to be a huge mess for USP’s, regardless of how they got the status, and for their families. The only upside for us is that once I’ve relinquished, and my dd is old enough to do the same, the USP nonsense ends. She didn’t live there long enough to be able to pass that loathsome citizenship on to her own children (fingers crossed though that they don’t change the rules – America is good at changing rules mid-game, Cheating is the American way).

  9. *Part of me wishes that all USP’s can be privy to this info all at once, like some huge world-wide public service announcement.  Then, we would be able to present a united front. 

  10. Which is why the info isn’t being made easily available or is being presented in a disingenuous way. A united front could undermine the whole scheme. Stealth and ignorance is the best thing that ever happened for the US creeping Charley of a tax and reporting system.

  11. *What FATCA is doing currently, is raising awareness of the bigger issue: CITIZENSHIP BASED TAXATION.  That is the real problem in my opinion.  FATCA might make perfect sense if the US practiced residence based taxation.  I can’t help but believe that there will eventually be a big backlash against the taxation of citizens abroad, especially when FATCA exposes people that have absolutely no financial connection to the US.  Mom always said “be careful what you wish for, it might just come true”.  Here’s your FATCA!  Now deal with 6 million pissed of ex-pats who just learned that they now owe tax to two countries.

  12. @marie

    You are correct in many aspects, however 6 million (and that’s a conservative estimate, IMO) will, if informed, react in a multitude if ways. Some will ostrich, some will comply and complain, some will protest, etc, etc. The persecution is what’s unfortunately keeping many voices silent, thus weakening the backlash.

  14. Be sure to read this post by Eric and/or the article, as it really adds fuel to the fire of privacy concerns…  In fact, IMHO, it is one of the more important Editorials on FATCA I have seen! 

    Foreign financial institutions will effectively become vast repositories of information on Americans—including what they earn, the sources of their income, what they spend, where they live, who their family members are, and so on. In their zeal to implicitly label Americans living abroad as tax cheats requiring monitoring, the sponsors of FATCA have shown utter indifference to the safety of their citizens. 

    To read more: http://www.nowlebanon.com/NewsArticleDetails.aspx?ID=464465&MID=0&PID=0#ixzz2EOb5sDZ3 

  18. I had a meeting with my (UK) MP on FATCA and the IGA yesterday.  In case it is useful for anyone, here’s a quick summary.

    We had discussed FATCA in six or seven emails over the course of a year, and I’d already brought out the sovereignty and expense issues.  I planned to describe how this would all personally affect a UK citizen accidental american, and prepared my narrative.  No visual aids.

    Here is what I learned.  The logic chain is too long to get through in 15min.  Accident of birth, causes US citizenship, causes taxability for life, mix in FATCA/IGA causes UK bank to report to HMRC and on to IRS, causes inevitability of filing US tax return, causes accountancy fees and extra taxes for pensions, ISAs (TFSAs), and so on, causes loss to the UK economy.  Too many steps that cannot be reduced to a graph or soundbite.  It would have been more powerful if either he or I were actually in this position.  Neither of us is, so it’s hypothetical; less impact.  I tried to get him to imagine if this was him but with limited success.  I suspect he’s someone who thinks more with head than heart.  Maybe this would work better on some than others.

    Here’s what I think my MP got out of this.  He was genuinely interested in the issue, which is a good start.  He took careful notes, and said he would take it up with colleagues.  It is as far from his area of expertise as mine, but he grasped several points.  Sovereignty and cost.  Genuinely shocked that the US pushes citizenship (and then taxation) on folk who may not want it or have no interest at all, purely because of accident of birth.  And requested several clarifications on the US policy of taxing citizens even if they “lived in Shanghai for the past 50 years”.  His grandmother was American, so a possible personal impact (could his mother be accidental? unlikely, but who knows).  He asked why the EU hadn’t coordinated a response.  I replied that this was a good question, and nobody knows.

    Finally, I thought that describing the problem would be good enough, but what my MP really wanted was suggested solutions.  Thinking about it, it is probably much easier for an MP to give colleagues or the civil service a couple of possible actions to take and let them consider the consequences, rather than a long list of the issues they then have to analyse for a response.  Easier to look from cause to effect than the other way.

    My suggested ideal solutions: reject FATCA, pass a UK law to make it illegal to comply with FATCA, and let the bank’s chips fall where they may; or tear up the IGA, forcing the banks to split into FATCA and non-FATCA branches.  Probably no longer politically feasible.

    My pragmatic solutions: modify the IGA so that no UK resident accounts at all are reported, even if held by US citizens living in the UK (including accidentals); and negotiate a new tax treaty that specifically negates the US exit tax, FATCA, and the “saving clause”, and add new language preventing the US from overriding it in future with domestic US laws.

    Anything I missed or could improve?  I probably won’t get to do this again, but just in case…

  20. It’s fascinating to observe how many nations are taking pre-emptive measures to mitigate the effects of FATCA when the US has not done anything that I know of to enforce it yet. So far it has been just threats. Does anyone know whether these IGA “negotiations” are initiated by the US or not? It strikes me as a self-inflicted wound if the individual country initiates the negotiations and surrenders their own sovereignty and protection of its citizens in doing so. Like negotiating with terrorists.

  21. @bubblebustin,

    From what I have seen and read, it is the various governments coming to the IRS beseeching them on behalf of their FFIs, and asking for inclusion in one of these FATCA IGA CRAM Downs.  

    It is a clever strategy, as it creates the impression that they want it, and it weakens their negotiating position. As if there is really anything of substance that can be negotiated. On the basic foundation, you can not negotiate for non compliance with what the U.S. wants.  

    The U.S. has put out the impression, with the model agreements, that “hey guys, this is the way you can decrease some of the compliance complexity and have your FFIs get around your privacy laws”.  

    The really only negotiation, that seems to be allowed is on the margins, in the Annexes which provide for the exemptions and who can be deemed compliant.  

    Of course, the impression Treasury is trying to create is that the “whole world” is eager to be compliant with this “anti-tax evasion” effort.  With the help of the press and the FCC (Fatca Compliance Complex) they are doing a pretty good job in this regard.

    Just look at the most recent stories about Ireland “signing” an IGA.  Only 3 of us made comments back to Reuter’s to counter their IRS propaganda story..

    http://www.reuters.com/article/2012/12/06/usa-tax-fatca-idUSL1E8N63DQ20121206

    @Watcher…

    Great work, and it is a tough story to get down into a 15 minute narrative that another countries MPs would have an interest in.  I do think that the security concerns of the broader population of effected Citizens of the Country might be one angle.  http://bit.ly/11Sp5xT

    Finally, thought I would add a back link to the most recent post by Eric on the Virginia Law Review attacking U.S. Fiscal Imperialism

  23. For our Francophone readers:

    http://affaires.lapresse.ca/economie/international/201211/28/01-4598698-double-citoyennete-les-banquiers-canadiens-inquiets.php

    “Double citoyenneté: les banquiers canadiens inquiets“

    Publié le 28 novembre 2012 à 16h34 |

    Julian Beltrame
    La Presse Canadienne
    Ottawa

    “Les dernières
    négociations afin d’arriver à une entente canado-américaine sur les
    déclarations de revenus des particuliers soulèvent des inquiétudes chez
    les banquiers canadiens, qui craignent d’être contraints de collaborer
    afin de dépister les Américains qui auraient produit de fausses
    déclarations – en plus de forcer les autorités canadiennes à refiler des
    renseignements personnels à leurs homologues américains    ……………”

  24. @Just Me: I do think that the security concerns of the broader population of affected Citizens of the Country might be one angle. 

    Perhaps.  But there are just soooo many things wrong about FATCA, if you enumerate them all your listener will think you are just making stuff up!

    I’m hoping to persuade the UK govt to protect duals and accidentals living here.  More modest than giving FATCA and the IGA a well deserved bullet to the back of the head, but more achievable given where the UK has already gone with the IGA.  Carving all UK resident accounts out of the IGA breaks the ugly interaction between FATCA and US citizenship-based taxation.  It’s not a fix for either, but it prevents them acting together to worsen an already difficult position for US persons abroad.

  25. @Watcher. 

    The ‘carve out’ might be your best strategy, as they are resident taxpayers in the UK, and why should the U.S. be able to get into their knickers too.  That probably makes the most sense to an MP. 

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