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. Finally, here is how the HIRE act and FATCA creates US jobs…

    Another example of the devil in the details…

    Outsourcing of Compliance Officer responsibility via power of attorney to a Third Party (IE, a US Tax proffessional… read Big 5 Accounting Firms)

    Another option for responsible officers or internal ATPs  (Authorized Third Parties) wishing to take advantage of the electronic option, but not wanting to or unable to provide an SSN or TIN, is to outsource the responsibility to a U.S. tax professional that is able and willing to take on the responsibility. Although not specified by the IRS, it is likely that U.S. tax professionals will only have to undergo ID verification once; enabling them to provide tax services to multiple clients without having to slow down the process.

    http://bit.ly/MiFKQ4

  2. It also seems like the refusal of foreign banks to take Americans could create opportunities for US banks to open branches in foreign countries. Who knows, maybe we’ll see some Bank of America or Wells Fargo branches opening up in Switzerland in the years to come.

  3. @Christophe

    The US bank would still be required to follow the banking law in the foreign country.

    If the foreign law forbids personal details being transmitted to the US government then they better not do it.  This gives the US bank at an enormous problem.  Get in trouble with the foreign government for breaking privacy laws or get in trouble with the US government for not breaking privacy laws.  I doubt many US banks would be interested.

    Its kind of like the catch 22 in the FBAR regulations that state that someone with signing authority over an account must disclose information about the account, even it it is against foreign law to do so.

  4. Caricom Punts On FATCA – Summit Ignores US Push As World Tax Police

    The legislation in question, the Foreign Account Tax Compliance Act, or FATCA, is one of a growing number of US laws that are extraterritorial in effect and have been introduced on the grounds of security, to counter terrorism and organised crime, or to address tax evasion.

    While this intent is to be applauded, it has the effect of extending US jurisdiction into the Caribbean and imposing strict and expensive obligations on governments, companies and institutions

  5. @JustMe:  Thanks.  It seems this writer has a handle on what’s happening, but it seems the Carribean leaders, like others around the world, are just shrugging and letting FATCA happen.

    The following two comments in the article are certainly accurate. 

    In recent years, the US, sometimes with European agreement,
    has been legislating in ways that seem to have as a subtext ensuring in
    the longer term regulation and rules are made in the image of US
    thinking.

    As the global balance of power changes and cybercrimes
    and new forms of criminality and warfare develop, it is likely that this
    desire on the part of the US for new forms of extraterritoriality will
    expand significantly.

    If only leaders would listen and DO SOMETHING!

  6. @Blaze..

    Sometimes the smaller countries see the issues more clearly than the larger ones!  No hope though that this could be the mouse that roars!  Canada is going to have to bear that responsibility, or not!

    I just posted a comment that is in moderation: 

    David,
    Very good analysis.  Many of us have been surprised too at how the entire worlds governments have meekly gone along with this Bush Iraqi war equivalence of Tax policy preemptive invasion on so many countries sovereignty.  You could call FATCA the new WMD, or Weapon of Money Destruction.  

    There is a school of thought, and there is a lot of evidence to support this, that a larger agenda is at play which stems from the OECD that would like to stop all tax competition between countries.  To do that, they need a policeman with a Big Stick, and in this regard the U.S. is very helpful.  

    FATCA is just a stepping stone, to a global tax data exchange. Call it GATCA if you wish.  In the FATCA Fanatics mind this is just great, as they want to strip all financial privacy from all of the worlds citizens. Total financial transparency is the goal. (Not for them, of course!)  

    Governments see FATCA/GATCA as a revenue enhancing tool for them as the U.S. is promising reciprocity and the IRS has imposed a domestic equivalent of FATCA on U.S. Banks. They are being required to report on all interest payments to non U.S. residents and that is causing some squawks like by the Florida Bankers Association as the U.S. is the biggest tax Haven in the world. The bankers worry about capital flight, but if there is nowhere to go, if OECD has its way, never mind!    If you are not aware of this development, the story with many media links in comments is told here… DATCA is not Dead!  http://bit.ly/LSJUET

    So, #FATCA is starting with the U.S. Person, as there are so many that are caught in a trap thinking that the U.S. greencard or Citizenship was a ticket to a better life.  Well, maybe that was true, but it comes with a cost-World wide taxation no matter where you live.  The equation may be at a tipping point. The cost vs benefit might have gone negative if you understand all the penalties that have been added to FATCA and FBAR requirements.  The IRS has been on a jihad on offshore accounts since 2008, and FATCA is just an extension of that. Failure of U.S. Persons to comply has some pretty draconian penalties.  

    So be warned.  It appears that the Caribbean countries are not going to stand up to the FATCA juggernaut, so now the non Rich dual citizen or U.S. greencard holder has some very serious decisions to make.  All of those living in the Caribbean were supposed to file their new FATCA form with their 1040 filings in 2011.  If they did not, there are some very serious consequences. http://bit.ly/LXAZ00

    FATCA is not a happy story. 

  7. @JustMe:  Unfortunately, the Canadian mouse has not been doing much roaring lately.  It has been silent for far too long–except to say it was “happy” with the small cheese the US recently threw our way.

  8. Has anyone heard of this one!  Boy, this is as far afield of the original intention of FATCA as you can get, and yet…?   If it is just rumor, maybe it is a good rumor to spread to get more outrage and wake up few ostriches!!  Look at what FATCA has done to me.  Now I am starting to think deviously, just like a politician!  

    FATCA tax laws will trap US courier customers

    Thousands of US expats who use a US address as a staging post for online shopping may be trapped under the new tax laws.

    However, tax experts are warning even non-US residents need to file paperwork with the Internal Revenue Service (IRS) under FATCA to avoid an investigation if they ship goods with US-based couriers.

    Anyone with a US address or using a US company as an agent is subject to the FATCA rules, warns Allison Peart, of Ernst & Young Jamaica.
    The problem, Peart explained, is you also have to prove you are not a US taxpayer if you ship goods or money through the US, otherwise tax may be due. 

  10. @Jefferson…  I really do not know what it means. It could be just a Tax attorney taking FATCA to some logical but absurd end, but what is absurd now, often becomes fact later, so you have to wonder!   

  13. *Just Me

    Interesting so I suspect if the US is requiring a “Strong” statement of support to start IGA negotiations it is unlikely that Canada is doing so given Flaherty’s past statements of protest. I wonder to what extent Canada and Australia “might” be working together behind the scenes.

  17. I think I saw this posted somewhere else, but thought I would put here on the FATCA questions…

    FATCA Compliance deadline extended for QIs (Qualified Intermediaries)

    The US Internal Revenue Service (IRS) is giving qualified intermediaries (QIs) an extra year to achieve compliance with the Foreign Accounts Tax Compliance Act (FATCA), which requires foreign banks to notify the assets of US taxpayers to the IRS. 

    Foreign banks cannot remain as QIs unless they become FATCA-compliant, and those whose QI status expires at the end of 2012 have now had their renewal date extended until the end of 2013.

    What is a QI, you might ask? (from the IRS Questions page)

    ANSWER 1:  A “Qualified Intermediary” (QI) is an eligible person that enters into a QI Agreement with the IRS pursuant to Rev. Proc. 2000-12, 2000-4 I.R.B. 387, and that acts as a QI under such Agreement.  Generally, under the QI Agreement, the QI agrees to assume certain documentation and withholding responsibilities in exchange for simplified information reporting for its foreign account holders and the ability not to disclose proprietary account holder information to a withholding agent that may be a competitor.

    QUESTION 2:   What kinds of entities are eligible to enter into a QI Agreement?

    ANSWER 2:  The following entities may enter into a QI Agreement:
    A foreign financial institution or foreign clearing organization (other than a U.S. branch or office), 
    A foreign branch or office of a U.S. financial institution or clearing organization,
    A foreign corporation, but only for the purpose of claiming treaty benefits for its shareholders, or 
    Any other entity acceptable to the IRS, determined on a case-by-case basis.  

  18. New comment coming out of Thailand.  They get what is wrong with FATCA, why can’t America…??

    http://www.thailawforum.com/blog/obama%E2%80%99s-irs-overseas 

    The Foreign Account Tax Compliance Act (FATCA) was enacted as a revenue increasing measure, but is yet another in a  series of laws that place additional burdens on US citizens residing abroad, otherwise known as expatriates or “expats”. These new laws include FBAR and the HIRE act. 

  19. The Latest Blow to American Competitiveness – FATCA

    As the cliché goes, “They never saw it coming!” Most Americans have never heard of the Foreign Account Tax Compliance Act (FATCA). Congress hid it inside of the Hiring Incentives to Restore Employment Act in 2010 (HIRE).  Just as with Obamacare, the main revenue “enhancers” in FATCA are designed to trigger after the November 2012 election.

    This was an interesting comment..

    This writer works on business projects predominately in other countries. We recently advised a new ship building venture in Sweden that if they accepted American investors they would be subject to FATCA disclosures. They made a reasonable decision to not accept American money. What will be an advisor’s liability if they fail to make a FATCA disclosure? What will the impact be on American competitiveness overseas? I am certain that David Axelrod doesn’t know – or care.

  20. FATCA AND THE SHAPING OF A NEW INTERNATIONAL TAX ORDER

    This comment goes beyond the discussion of FATCA’s provisions, the analysis of its applicability and/or the necessary logistics to be put in place by FFIs in order to prevent clashes with the IRS or mitigate the bruises and bumps in complying with FATCA; it hypothesizes an implementation and enforcement of multiple FATCA-like legislations due to the domino effect that the US FATCA will create or simply as a retaliation to this latter; or the implementation of a multilateral FATCA-like agreement as a logical outcome of a concerted intergovernmental approach like a GATCA..

  21. *JustMe

    FATCA AND THE SHAPING OF A NEW INTERNATIONAL TAX ORDER

    Interestingly enough the guy who wrote that lives in Peterborough Ontario. A friend of mine Patrick responded to him on LinkedIn basically saying ok sounds great but how are going to get you local Canadian MP Dean Del Mastro to go along with this. The same Dean Del Mastro who comes out and says hardworking Canadian taxpayers aren’t going to bailout sumptuous European welfare states banking problems. According to my friend Patrick he got several LinkedIn likes from people at Bank of Nova Scotia after commenting his proposal really didn’t solve most of the problems for FATCA in Canada.

  22. @Tim…

    Thanks for that insight. I saw Patricks comments, and I have my own ready to go, if it passes the moderation filter.  

    Here it is…

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.

    After reading the report, it gives voice to what I have thought for a long time.  FATCA intended or not, was about forcing a global order, GATCA, I call it.  It aligns the efforts of the OECD and those “FATCA true believers” in DC who are determined to end tax competition between the countries. They just can’t stand the idea that the Rich might look to another country to store their wealth or invest their money because of a more favorable tax regime somewhere else.

    So, while I agree, that there may be a birth of a new International tax order, I am not sure it will be the one the author envisions. What form this GATCA takes is very much open to question, but I appreciate the author attempting to articulate some vision.  He certainly does a good job pointing out all the problems with the extra territorial nature of FATCA and its attack on other countries sovereignty.

    It is hard for me to believe that there would be an international coordinating body that the IRS would accept. I sometimes think the International Revenue Service wants to force the US domestic tax system on the entire world, and they will do the coordinating thank you very much.  Once a sheriff, it is hard to take off your badge and turn in your gun!

    The BIGGEST obstacle to the author’s vision of a (iii Mutual Enforcement of a Multilateral FATCA), is the American practice of Citizenship taxation.

    I think the author may underestimate the problem that creates for the GATCA he envisions.  To make that choice work as represented in this paper, the U.S. is going to have to give it up in favor of the Territorial system that the rest of the world practices.

    Given current state of politics in the U.S., it isn’t going to happen in the short to medium term.  So, the question is, will the rest of the world allow the U.S. Citizenship taxation outlier to continue to function in a multilateral GATCA universe where the U.S. effectively steals wealth from other countries treasuries through double taxation of dual citizens and resident U.S. Persons?  How fair is that? It would still be one rule for the Sheriff and one for the rest of the world.

    (BTW, don’t believe the myth that tax treaties or US credits do away with double taxation. They don’t, for many reasons I won’t go into here.)

    You certainly DO NOT want the rest of the world to begin modelling the U.S. Citizenship taxation to make this GATCA work, although that would be very tempting for some EU countries that may think this is a short cut to new revenues.

    If the author thinks solution (ii) with retaliatory FATCAS is bad, he may have not considered the other the domino and boomerang effect that has countries fighting over the rights to tax citizens resident in each others country just like the U.S. does. That is the copy cat practice I worry about, more than retaliatory FATCAs.  What would be the international tribunal for the adjudication on which country has the right to tax which citizen where?!  We would have an incredible mess on our hands.  Here is a little thought experiment on what that might look like…  http://bit.ly/NJlfPw

    So, given how the U.S. views itself, there is no way that Congress is going to give up on Citizenship taxation. And, given the hubris in the IRS leadership, there is no way that the International Revenue Service is going to give up its Sheriff prerogatives to some international tax coordination body to apportion tax revenue. The only international coordination body the political climate in America would allow, is the IRS. End of story.

    I am afraid, you are going to have to fight the Sheriff another way. Maybe that means a cartel of non compliant FFIs and countries just moving their financial activities to another center and diminishing the impact of dealing in American financial products. This could also be a new world order being birthed.  I call it FATCA Fallout.

    Just my opinion. I could be wrong. 🙂

  23. @Tim….

    Did you see this comment on Linked in…  ??

    in response to the question: 

    Cathryn Phelps • Hi. Do you know if the comment letters to IRS have been answered by IRS and if so, are these posted anywhere, publicly? Thanks

    Jim Calvin • There has been no response to the comment letters. I think the final regulations will the response; though, we should see a draft FFI Agreement before the final regulations. 

    Mark State • I understand prior to both of those we will see the publication of the IGAs (very likely within the next 7 days), which will give a very good indication of the IRS thinking as these replace the regulations in the relevant jurisdictions.

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