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. @ Joe Smith

    I remember that comment now. If this advocate is lurking here I hope she steps up to the plate soon because she has a good head on her shoulders and I would love to know how her 80 year old aunt is fairing. I hate to think of people having their golden years tarnished by stress like this. Actually that goes for anyone in any of their years.

  3. The U.S. Road to Reciprocity under FATCA

    The U.S. has committed to reciprocity in collecting and automatically exchanging information on accounts held in U.S. financial institutions by residents of the G5 (France, Germany, Italy, Spain, and the U.K.) under the Intergovernmental Approach (IGA) announced in February. The exchange of information is likely to be on a bilateral basis only with the U.S. – meaning, the G5 will not exchange information with one another. Notably, neither the Japanese nor Swiss Frameworks include an automatic exchange of information provision with the U.S. Thus, it is likely that only agreements based upon the G5 IGA model, now expected in July (rather than June), will include reciprocity provisions.

  4. I found out that the European Union did something similar to FATCA in 2005. It’s the European Union Savings Directive (EUSD), where each country has to report on the interest earned on accounts held by residents of the other countries. I wonder if the US got the idea of FATCA from EUSD. However, there are some fundamental differences between the two:

    EUSD only applies within the EU, and in countries with which the EU negotiated specific treaties to apply the directive, not a unilateral imposition on the whole world like FATCA;
    To avoid violating the bank secrecy laws of some countries, the EU allowed them to withhold tax anonymously instead of reporting the interest, and the account holder can use the withheld tax as a credit in the tax return;
    Only the interest generated in the account is reported, not the value of the account or any other type of income deposited into it (I don’t undestand why the US is interested in the value of the account as it is irrelevant to the income tax);
    The interest is reported to the country of residence of the account holder, not the country of citizenship, so the directive only applies to those who have money outside the country where they live.

    EUSD appears much more reasonable than FATCA, as the reporting is more simple, has an alternative that does not violate local law, only applies where the EU has negotiated a treaty, and actually reports relevant information or withholds tax. And of course, only truly foreign accounts are affected, not those where the person resides. Apparently, EUSD has generated much less revenue than what was thought it would, just like it will probably happen with FATCA. Moreover, FATCA seems to have been poorly designed, as it does not even give very relevant information to the US, the tax from income generated abroad is not withheld, not to mention the huge costs of implementation and the hassles caused to Americans abroad. A waste of time and money to everyone, in my opinion.

  5. @Shadow Raider

    I don’t understand why the US is interested in the value of the account as it is irrelevant to the income tax.

    Two primary reasons: US estate tax, and FBAR penalties.

    A waste of time and money to everyone, in my opinion.

    Mine too, and a lot of other people’s.  But almost all of the costs in wasted money and time will be borne by non-US banks and investors.  Any benefit that does accrue (no matter how infinitesimally small) goes to the US.  So congress doesn’t care about costs at all.

  6. @Shadow Raider and Watcher.

    Re:  I don’t understand why the US is interested in the value of the account as it is irrelevant to the income tax. 

    I have wondered about that too and think about it alot.  I suppose, in recent history, it starts from the Bank Secrecy Act of 1970, where the purpose is supposedly to identify money laundering and terror funding. In that regard seeing account information and volume “MIGHT”  provide some insight if all of us voluntarily report and “IF” they actually analyse it or can make sense of it. (That is a BIG MIGHT and IF.) 

    Now, if I report like a good little citizen should, they can see “Just Me” with a piddly $10,000 in an account one year, suddenly jump to $2,000,000 next year and think, “Where did he get that money and where did it come from? Was he laundering money from somewhere, because his income has never been that high?  Since he blogs as IBS, is he planning to use that money for some anti American activity?”   Or.. at least that is how I think, they think or intended to use this data.  

    FBARs were supposed to trigger those type of investigations, but from the FinCen reports, in fact, there seems to have been very little prosecution effort arising from this requirement. (Input FBAR in that search and see what you get.)

    So in-spite of the penalty hammer, where if you don’t do it voluntarily we will penalize the hell out of you, this FBAR program has not been a very successful adventure. Only the “low risk tolerant” innocent report, (if they know they are supposed to) and the “high risk tolerant” criminals just laugh it off or ignore it. It doesn’t change behavior significantly. The honest report, and the dishonest do not. Duh!

    Congress, knowing that their FBAR effort is really ineffective, feel they have to impose non voluntary measures like FATCA while leaving in place the voluntarily measures (FBAR) as penalties are a handy tool. Actually they have increased  the penalties over time, as we know, including adding those non willful penalties as a real beauty for revenue enhancement. 

    Also, given the incredible complexity of corporate and individual financial affairs these days, with all the legal methods (loopholes) available to hide or obscure assets and income offshore, (even with FBAR reporting) they probably want to create more “Transparency” as to what individuals or corporations are doing with their money. This is a statutory offset to all the special Congressional legislation that has built up over the years which has created the complex legal maneuvers that allow for this “legal” activity in the first place.  The dog is chasing its tail, so to speak. 

    You only have to look at the complexity of Romney’s financial affairs or here to understand that a lot of questions being asked by the press about his assets would probably be answered in the FBAR and new FATCA 8398 forms plus compliant FFI reporting requirements, although never under estimate the ingenuity of the man to find other ways to thwart this effort. Hiding money from government has been a cat and mouse game played through the eons since man first emerged from the caves.

    There is also the school of thought, that this account and asset knowledge from FATCA requirements is setting the ground work for an asset tax as a supplement to income taxation which has effectively (legally) been manipulated to a level where the richest have a very attractive effective tax rate (15% compared to a tax table rate). To participate, all you have to do is arrange their financial affairs appropriately. If you decide to just live off salary income, then you are the chump. This is all legal as provided by Congressional Statues over the years.  

    The 15% dividend and Capital gains provisions (and what is allowed to be deemed as such) are of course couched in “job creator, small Business or investment incentive” language. They are necessary for capital formation, or so the ‘talking point’ rhetoric goes. In practice, we now give a big 15% tax benefit to Casino style financial engineering or offshore manipulations, and somehow we are supposed to believe that this is good for America’s Capitalist system, and capital formation that creates more jobs.  Maybe it is, and maybe it is not, depending on your partisan view. Given the job loses since 2008, the flat or declining middle class income, the shrinking middle class as a percentage of the total, the increasing spread between the top and the bottom of our income creation, it is hard to argue with a straight face that all of this is good for America, but I do understand the theory of those arguments.  I just quibble with the application of it all. 

    Bottomline, the government wants to know EVERYTHING about you and your financial affairs. It is just the nature of the Big Government Trend lines these days that are closely paralleled by our BIG technological revolution.  BIG DATA is what Big Government and Big Commerce marketers want on each of us, and are using Big Technology combined with a little additional push by Big Government to get us to this Utopian or Orwellian world.

    They will get it voluntarily via our google search,  internet browsing cookies, and Facebook entries for example, or involuntarily by using unilateral actions like FATCA and the NSA communication spying just to name two government efforts, with many more buried beneath the Homeland Security Administration.  

    I think we have to recognize that all Governments would like their citizens to be totally transparent in actions and in finances, and all Governments everywhere will attempt to remain behind secrecy walls. One rule for us, and one for them! This is not just an American phenomena, although we could be in the forefront right now, except that China may be better at it. 

    Of course Germany and EU countries have had recent experience with that lack of individual privacy in the cold war years, with neighbors spying on neighbors, and that is why they are much more protective of privacy than Americans, but given time, that memory erodes too.  

    In the Big Picture of things, the trend world wide is in the opposite direction of individual privacy, and FATCA is part of that “force of nature” global trend, in my opinion. FATCA, begets DATCA, begets GATCA.  It truly is a brave new world we are entering, and the question for me is how much time and effort is the average citizen going to put into any effort to oppose the tide.  

  7. @ Just Me:
    “the question for me is how much time and effort is the average citizen going to put into any effort to oppose the tide”

    The problem is that right now, very few people are aware of FACTA. I think we are a minority, even in the immigrant/expat population to know about it. All the articles about it have been in the finance press. It almost seems like they’re trying to put it in place without anyone knowing about it, except the financial players who are going to enforce the rules.
    I am still puzzled about the why of this legislation. They advertize it a tax evasion measure, but why put in place such a monster to catch maybe 100,000 individuals and inconvenience millions.
    Instead, I would be in favor of forcing the banks to report large money wires. That would be more effective in both tax evasion and money laundering. And isn’t it something that they’re already doing anyway?
    And another question that I think has been raised what are they going to do with the HUGE amount of data that FACTA is going to generate. Are they going to have the man power to do something with it?

  8. Here are three more articles on FATCA.  The first FATCA Incompatible With Swiss Privacy Laws seems to lean in the direction of GATCA through government to government exchange of information.  This article recognizes “the level of data protection in the USA, which is not equal to the one in Europe and Switzerland. The IRS would process a lot of personal data of bank customers and would not be bound
    by law to keep the data secret and to itself. Also, Swiss authorities would not have the same access to data in America.”

    The second from Jamaica says Even Courier Customers Could Be Affected by FATCA.  A Managing Partner with Ernest Young says “What FATCA has done is get the banks off the hook by allowing them
    to be able to provide the information to a third party without asking
    the customer’s permission, providing the information is now a
    requirement of the banks,”

    It may get the banks “off the hook” in terms of revealing information to IRS from Jamaica, but Canadian banks are still bound by Canadian privacy and banking laws–which do not allow such release of information. 

    The Bahamas Are Urged to Advocate Against FATCA by our friend James Jatras.

    “When all is said and done, the targeting of fat cats and tax cheats and all that stuff is
    a red herring. It’s a way to shut people up and get them to go along with this great, big invasive plan to put everybody in a financial fish bowl,” Mr Jatras said.  Yep, sounds like exactly what Just Me and the rest of us have been saying about GATCA.




  9. @Blaze…

    Your first two links aren’t working right…  Would love to read them…

    @Christorphe…

    Re what are they going to do with the HUGE amount of data that FACTA is going to generate? Are they going to have the man power to do something with it?

    They will build warehouses to store it.  Some construction company will get the contract, and therefore the Hire Act will actually create construction jobs.  No they will not have the man power until Congress Funds it, and even Republicans who claim to hate bigger government will give the IRS more money, so in time maybe they eventually will. 

    mvh

  10. A bit off subject, but I see the Libor scandal is hitting Canadian Financial institutions, and you have to wonder about the impact this might have. It is the delayed blow back of the U.S. housing crash and market meltdown in 2008 of which the Canada banking largely escaped the most negative impacts. You can’t help but wonder that this is a most inopportune time for FATCA regulatory troubles to be added to a negative situation right now… If I were a Canadian, I would be paying close attention to this story…

    Fallout from Libor scandal likely to hit Canada’s financial industry 

  14. Here’s more from Bahamas:  Senior Banker Queries If FATCA Breaches The Law

    Interestingly, the senior banker who is quoted works for a Bahamas branch of a Canadian bank (Scotiabank).  Sam Haven (Don’t you just love the irony of his last name?!?) emphasized he was not speaking on behalf of Scotiabank.  I wonder if Mr. Haven is also Canadian. 

    Mr. Haven said FATCA will impose “lots of duress” on jurisdictions such as the Bahamas.  He explains FATCA seeks to make Bahamian financial institutions “tax agents” of IRS and requires them to breach client confidentiality enshrined in Bahamian law.

    It gets a bit scary after that “The important thing for us is to have the regulators and government enter into the negotiations to decide how best to implement this,AND MAKE SURE THERE ARE CHANGES TO OUR LAWS TO ACCOMMODATE THIS if we decide this is the way we want to go.” 

    I certainly hope Mr. Haven is not making similar suggestions to Canadian officials.

    There is no mention as to whether Bahamian banks have any record whether Bahamian residents are US persons or if they are even permitted to gather this information,

    Mr. Haven says US “power and might” would be virtually impossible to resist, especially given the need for all banks to access the US financial and capital markets systems.

    Yep, US and IRS are certainly big bullies.

  15. @Blaze…

    thanks for that find.  I did a few tweets out of that one, and I see that the NY Post just started following me, so maybe this will give them some fodder!!

    You should tweet too.  We need more of us.. 🙂

     ‏@FATCA_Fallout

    The cost of implementing what they’re proposing ( ‪#FATCA‬) is going to be exorbitant and enormous,” Mr Haven added.

    Expand

    16sMarvin Van Horn ‏@FATCA_Fallout

    What ‪#FATCA‬ attempts to do is make all financial institutions reporting agents of the IRS,” Mr Haven told Tribune Business.

    Expand

    18sMarvin Van Horn ‏@FATCA_Fallout

    Would complying with provisions of ‪#FATCA‬ put us in breach of confidentiality laws as set out in the Banks &Trust Companies Regulation Act

    Expand

    8mMarvin Van Horn ‏@FATCA_Fallout

    Senior Banker Queries if ‪#Fatca‬ ‘Breaches The Law’ http://bit.ly/Nl7aFp Maybe a Bahamian banker will stand up and just say NO to the IRS.

    Expand

  17. @Christophe:  Thanks.  Not surprising that the New York based authors don’t bother to mention the fact that FATCA violates laws of other countries, including Canada’s bank, privacy and human rights laws.  As a result, they simply recommend moving “quickly but carefully” and lay out strategies for communications.  This is typical American arrogance that US laws have universal supremacy and those of other countries are inconsequential.

    I’ve already assured my bank if they “communicate” with me to request information about my place of birth, they will be communicating with a lawyer instead of with me directly.  Tiger, Somerfugl and I have already consulted one.  In addition, I have contacted Canadian Civil Liberties Association, Canadian Privacy Commissioner and Financial Consumers Association of Canada and numerous Canadian politicians.

    I tried to post a comment on the website for this most recent “quickly and carefully” article, but did not seem to be able to do so.  I will keep trying.

  18. Here’s one from the Freemont Group in United Arab Emirates:  FATCA:  First Step To Capital Controls.

    The lead on the story says what we have been saying for months:  “The recently enacted Foreign Account Tax Compliance Act (FATCA) threatens to isolate the United States by treating every American citizen as a suspected tax evader.”

    It’s a really short article, but it captures perfectly the FATCA Monster trying to bully the world.   Unfortunately, it only addresses US citizens, not former citizens, accidental Americans, immigrants, substantial presence folks, etc.

  21. @Christophe and Blaze…

    I have decided that they do not want comments, as I constantly get a return that I am using the wrong CAPTCHA solution  and I know they are absolutely correct.  I give up.

  22. Business Finance Magazine: “Managing FATCA Client Communications: Move Quickly but Carefully”

    http://businessfinancemag.com/article/managing-fatca-client-communications-move-quickly-carefully-0709

    The REAL reason banks are being so quiet about FATCA:

    “Telling clients that they will have to provide additional, more detailed information on an ongoing basis — and at a potentially higher cost — may spur customers to reconsider their relationships.”

  23. John Brown…

    And this is key….

    determine the most effective ways to educate and efficiently gather the necessary information from their clients — without annoying them.

  24. @John Brown and Just Me:  And no mention of breaking the laws of other countries in doing so.

    Gee Whiz, Do they really think I might reconsider my 35 year relationship with my bank if it tries to violate my legislated privacy, banking and human rights?!? 

    I wish we could leave comments!

  25. @Blaze…

    I gave up trying, 

    I think we have to remember, that these guys are part of the FCC or FATCA Compliance Complex.  At this stage they care not about the issues you and I are concerned about.  

    They just are thinking, “how do we do this?” without any judgments about “Should we be doing this?”  That is for the politicians. Not their job.  They are just the implementers.   I thought this entire article could be summed up thus:

    Since you have to comply, think about how to keep from pissing your customers off!

    That is all this article was about.

    and let’s hope that most FFIs fail miserably in that application.  The more they piss their customers off, (especially non US persons) the better it will be for us and our message. 

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