If you’re an American expat in Taiwan, or an immigrant from Taiwan living in the U.S., or even a former immigrant who went back to Taiwan after you got your green card or U.S. passport, look out: your bank in Taiwan wants to sell you and your kids down the river in order to cut their costs of complying with FATCA. Here’s two recent items of coverage from Taiwan newspapers that I’ve translated into English.
These articles demonstrate a pattern of behaviour we’re seeing in country after country: banks do not care about their customers, but only seek to reduce their costs by whatever means necessary. Since they’ve come to the conclusion that they can’t fight FATCA, they’re happy to ask governments to put national privacy laws in the shredder, as long as the banks themselves don’t have to take the blame or bear the costs.
The first article is a brief, just-the-facts-ma’am report which clearly attributes the advocacy for an inter-govermental agreement solely to the Bankers’ Association, and doesn’t try to shill for such an agreement:
Banks hope government will come forward on reporting of U.S. tax information
24 February 2012, United Daily News reporter Chiu Chin-lan, Taipei
The Bankers Association [of the Republic of China on Taiwan] held a seminar yesterday to discuss the latest developments on the “U.S. Foreign Account Tax Compliance Act” (FATCA) which imposes tax on Americans’ overseas assets. Banks mostly hope that the government can copy the practise of the five countries in Europe, so that the problem of overseas account taxation can be resolved “government-to-government”.
FATCA will come into effect on New Year’s Day in 2013. In the future, “foreign financial institutions” as defined by the law will have to report the account information of U.S. tax residents (including U.S. citizens, U.S. green card holders, and long-term U.S. residents) to the United States’ Internal Revenue Service. If financial institutions do not obey, beginning in 2014 they will face a punitive withholding of 30% on income arising from their U.S. investments.
FATCA’s impact on financial institutions is quite large. The other day, the U.S. published a draft of the implementation regulations. Although they loosened the reporting thresholds, which should help to ease the finance industry’s burden, finance industry personnel believe that the only way to truly relieve the pressure and difficulties that financial institutions face is to adopt an intergovernmental model of cooperation like the five-country European plan.
The second article is a longer item which demonstrates an important principle of journalism: “less is more”. The article would have been much better if the journalist had included fewer details, since all of the details she gives are accompanied by shilling for the Bankers Association’s view. A couple of months ago on my personal blog I translated one other item by the same journalist. That was much more balanced than this one, so I’m surprised by this sudden drop in quality.
A solution to U.S. FATCA tax collection: Taiwan and U.S. may sign agreement
24 February 2012, Apple Daily reporter Liu Pei-chun, Taipei
There may be a solution to the U.S.’ giant plan to collect tax all around the world, by adopting the model of cross-border governmental cooperation, to avoid having to deal with every financial institution around the world. That is to say, if Taiwan and the U.S. sign a FATCA accord, the country’s banks will be free of taxation by the U.S., will not have to report, and will not have to close uncooperative accounts, because under an international governmental agreement, the country’s banks will not need to directly sign agreements with the U.S. side, and will not violate the Personal Information Protection Act.
Adopt cross-border governmental cooperation
Once Taiwan and the U.S. can sign a “FATCA accord”, both sides’ governments will exchange information on a reciprocal basis with the aim of attacking cross-border tax evasion. For example, the U.S. will first provide Taiwan with the names of 100 U.S. citizen customers who are evading taxes, and Taiwan will give those names to the finance industry for investigation.
That is to say, if a cross-border agreement can be reached, banks will not need to take up the burden of “identifying potential U.S. [person] accounts” and will not need to close uncooperative accounts, while U.S. citizen customers who open accounts at banks will not need to worry that information will get sent to the U.S. as long as the amount exceeds US$50,000 (roughly NT$1.5 million).
The Bankers Association’s board yesterday released its report, and will also consult with the Financial Supervisory Commission. It is understood that even if the U.S. and Taiwan do not have a [double] taxation agreement, they can still sign a cross-border FATCA accord.
I translated the phrase “只要超過5萬美元也不必擔心資料會被報送到美國去” as “will not need to worry that information will get sent to the U.S. as long as the amount exceeds US$50,000”. This makes absolutely no sense even in the original. Either the journalist is under the bizarre impression that U.S. Persons will be thrilled that the bank automatically sends their information to the IRS, or she left out a “does not” before “exceeds”. I’m guessing it’s the former, as the whole tone of the article makes it very clear she only talked to the Bankers Association, not any of the hundreds of thousands of dual citizens in Taiwan who might be affected by FATCA. Going on with the article:
Country’s banks will be free of U.S. tax
According to the Bankers Association’s report, the U.S. side has already signed up five countries (the U.K., France, Germany, Italy, and Spain) as “FATCA Partners”. Under their agreement, information will be shared and exchanged across borders at the governmental level. The financial industries of these five countries will report the information directly to their home country governments, instead of reporting it to the United States.
Under this agreement, FATCA Partner Countries consent to three feasible mechanisms. These five countries’ financial industries must gather and report to their governments all the information required for execution of tax collection. Next, the financial industries must also establish substantative review procedures to distinguish U.S. accounts. Finally, on a basis of automatic information transmission, the governments will transfer to the United States all the information reported by their financial industries.
The United States also pledged that FATCA Partner Countries’ financial industries will not need to directly sign agreements with the U.S., will not have to transmit customer information, and will not have to pay tax. Furthermore, based on the premise of reciprocity, the U.S. government will gather and send information about the accounts of U.S. citizens domiciled in the Partner Countries, which those Partner Countries will then use to investigate tax evasion.
There are a lot of dual citizens in Taiwan, spread out on both sides of the political spectrum. If you know any, or know anyone who has parents in Taiwan, tell them to write their legislators and oppose the Bankers’ Association’s plan to sell out Taiwan’s sovereignty and shred its privacy laws in order to save a few dollars.
Exactly. Happened to me and to another contact in Germany. They will only allow me to keep a current account open, while my contact (30 year resident of Germany) has since become a German citizen and renounced so that he could maintain normal banking activities. I also have been denied as a signer on company accounts due to FATCA. It is affecting me beyond tax issues for sure!
@M: IRS and Congress have neglected to tell FFIs and so-called “US persons” around the world that it’s only Swiss banks that are targeted under FATCA.
IRS and Congress also haven’t bothered to tell Canadian Minister of Finance or Canadian Bankers Assocation that they are only interested in the Swiss. They are pouring huge resources into trying to deal with this, while respecting the legal and moral rights of Canadian citizens and residents. IRS hasn’t told other countries around the world with whom they are attempting to negotiate “reciprocity” agreements that this is only about the Swiss.
May I be assured that I can take your understanding to my Canadian bank and tell them they won’t be required to determine if I am a US person? May I also tell them they are not in jeopardy of having IRS withhold 30% of their US profits for not complying with FATCA?. Finally, may I tell them, based on your assurance, that they will not be required to close my 30 year accounts with them if I don;t give them the information IRS is demanding about this Canadian citizen who was told she was “permanently and irrevocably” renouncing her US citizenship by becoming a Canadian citizen almost 40 years ago?
Could you let IRS know FATCA only applies to Swiss Banks? I suspect they will be surprised at learning that.
UnclTell: How do you–as Swiss Ambassador–feel about your country being singled out for FATCA? I’m really sorry to learn that about your country, but it will be a huge relief to all other countries and US persons around the world to learn this!
Someone needs to quickly get an international press release out about this. Perhaps the new $15 million PR folks at IRS could do that–Soon!
I think I understand. Regarding the first issue: “US person”. That is a US Treasury/IRS definition only. You don’t have to personally accept it. Ie, if you don’t fee like a US person, why declare yourself one?
Second, regarding the banks, please keep in mind that not even banks in the US are required to collect that information until 2013. And I read that is being blocked due to Florida banks holding secret accounts for Latin Americans.
Why would banks in other countries collect information before US banks?
It seems to me that they are falling for the bluff.
It seems to me one should encourage one’s country (and her banks) to not comply with US Treasury/IRS regulations.
Foreigners should understand that the IRS, the US Treasury and the US Congress make laws and regulations that are routinely stuck down in the courts, ignored, cheated, avoided, impossible to collect or enforce, etc.
For that reason they use outrageous bluffs and bluster instead (or in addition to, common sense laws).
“Foreigners should understand that the IRS, the US Treasury and the US Congress make laws and regulations that are routinely stuck down in the courts, ignored, cheated, avoided, impossible to collect or enforce, etc.” says @M
This is by far the most overt statement of a theme I have been noticing and thinking about for a while. It seems to me that for many in America it’s all a big game. The ( mostly wealthy) people, who try to get away with as much as possible, vs the government who tries to keep up by making new, (often poorly thought out) laws. So we are advised basically to “just ignore it”
I have never heard anything like this in Canada, so maybe it is a uniquely American approach. I also wonder whether that is why the US seems to have such a problem with tax evaders. Not that they don’t exist elsewhere, but the Americans seem to have raised it to an art form!
I live in a country where it is generally presumed that laws are intended to be followed. I don’t want to play this “game”. I want out, but i can’t get out without following the rules for a little while at least. But the sooner I can extricate myself the better.
@M: “I think I understand.”
It appears not.
@M: You asked “Why would banks in other countries collect information before US banks?”
That’s been our question and our bank’s question all along. The simple answer is $$$$$. The penalties IRS are threatening are very disturbing.
I will ask you another question: If FATCA doesn’t affect banks outside of Switzerland, why are “US Persons” who have been living, working, earning a living, saving money for their children’s education and their own retirement and paying taxes in their countries of residence having their bank accounts closed or being refused the right to open a bank account solely because of where they were born. It has not happened yet in Canada, but it is happening in other countries. Canadian Bankers Association has a fact sheet on their website that tells clients who are US Persons they may be required to refuse to open an account.
In terms of “US Person,” IRS and DOS have different views about what it means than you do–or than most of us do. We may not consider ourselves “US persons,” but IRS seems to be trying to reclaim us. “DOS” is making it very challenging to shake the IRS term-regardless of what DOS told us decades ago.
It this is a “bluff,” the United States of Arrogance has again created animosity, hostility and bitterness throughout the world. I shouldn’t be surprised. That is something they have always excelled at. The big difference this time is that their target has been the very people who could be their best spokespersons worldwide–their own citizens and former citizens.
For us, this isn’t a poker game. It’s real people trying to live real lives thrust into this horrible nightmare by the country of our birth We keep hoping we’ll wake up and it will be over.
It’s like a marriage. Once you’re betrayed, the trust is gone. Most just want a speedy divorce. Those of us who divorced the US long ago married a new country. Yet, all these years later, we are being stalked and harassed by our former spouse. Now, we’re trying desperately to get a restraining order.
The very people who should be helping us get the restraining order (Consulates) are challenging us every step of the way. By doing so, they put the power in the hands of the stalker.
Just let everyone know, M was another person I invited over here who is a regular poster over at Jack Townsend’s blog. I believe in a strict legal sense he is right in the sense Canada, Switzerland or any other country has no obligation to abide by US tax law beyond any existing treaty obligations. Effectively what all of us have been doing here by writing letters to Flaherty et all is in fact encouraging Canada not to go along with FATCA. Having said that despite the substantial efforts being made at sites like this I believe this is a still a very uphill fight that won’t be resovled anytime soon. To the extent that what the US is doing is a bluff it is because at some point they need to the Canadian government’s cooperation to pull this off which I believe if we keep the pressure up on Flaherty will not be granted. In terms of the motivation from the US perspective I do think at a certain raw political level it is aimed more at traditional tax havens not countries like Canada however, whether it be ignorance or arrogance there appears to be no real distinction being if you look at the actual implementation;
I’ll try to post more later tonight as to what I believe the best response to situation CanuckDoc encountered.
Thanks for inviting M here. I always enjoy the comments at Jack’s blog and the perspectives he brings. He is provocative. Comes at things from a little different angle and makes you think. That is good. Often his comments are more of a BIG picture look at what is going on on the ground, or as we say in the aviation industry, the “30 thousand foot” perspective. It may not soothe the feelings of those of us feeling the ground level impacts, or the many faceted actual or perceived unintended consequences, but perspective is important. I like hearing that perspective.
Thanks M for heading over this way.
Thanks for inviting me. Yes, there are some philosophical differences between law-abiding and law-bending.
I like to look at this metaphor:
Let’s say there is a (school) bully and a thief that asks how much money you have and in which pockets you keep it. I think it is ok to lie. Even if he has the power to search you, and beat you up if he finds it, you should still lie, out of principle.
Some hire expensive bodyguards, some hide their money with others, but the cheapest alternative is to lie.
Also, I believe that the bully should have to work for the money, ie search for it, (audit) before anyone voluntarily giving it to him.
If the bully lives in another country, he does not have the power to search you or beat you up, so there is no loss in ignoring him. Yet I am surprised in how many give-in even so.
In this FATCA situation, the bully scared your friends in your country to ask you questions on his behalf. The question is how to instil the courage (in the banks and the govt) to say no to the bully.
The problem with that is that the friends see the bully as a legitimate organization offering similar services to them (government and taxation).
Not living in the US, they don’t understand the overreaches that this bully regularly makes and that the population has to keep him in check.
Until this is made clear, I think one should lie, as if lying directly to the bully, since he is the one ultimately asking the questions.
@M The bully is threatening a very real, scary thing to all these other countries and their banks. And it seems to be something he has the power to do on their own. I think if the IRS just said “give us the information”, no one would pay the slightest attention. But they are threatening to withhold money from FFI’s. which sounds like it would be pretty scarey to a bank.
So the bully is not just saying “where is your money?” He is saying to my “friends” If you don’t tell me where xxx keeps his money and how much he has, we will beat you up. And the bully is a lot bigger and looks like he could do it too! He hasn’t done this particular thing before, but he’s known to do things like invade countries he doesn’t like, so his threats are not something one would want to ignore.
You can understand why no FFI wants to take the risk. So it must seem to the governments that if the bully is going to beat up their banks, they’re better off signing an agreement to protect the banks and maybe get a little something they want (although it doesn’t seem like any kind of fair trade -US “persons” for European “residents”)
Now, i am not an economist but it seems to me that the practicalities of doing what they are threatening to do are very complex, especailly if there is supposed to be some way of getting back money that has been withheld. And i wondered whether the whole thing might collapse under the weight of the bureacracy it would require.
What would actually happen if all the other countries of the world said “No” Would the US really withhold all that money? Sounds like it might be really good for the US economy if it worked, although it would throw a huge monkey wrench in the world’s financial system.
But nobody who knows more about it than me has even addressed that issue, it seems economists are all agreed it would be awful and that is the end of the discussion. I would love to hear someone say, “they couldn’t possibly do it-they’re just bluffing” but nobody is saying that.
I am hoping to do a more detailed post tommorrow on CanuckDoc’s encounter with their financial advisor however, I wanted to share a document I am current looking at regarding the PRESENT arrangements regarding investment accounts in Canada holding US securities and the arrangements they have with the IRS(The current program they are under called Qualified Intermediary goes back to 2001).
@M, CanuckDoc, others: Now, the US thinks the US should continue to lead the World Bank. Is anyone surprised at this audacity? Of course, every nation on earth should want to model itself after a country with trillions of dollars of debt, mortgage foreclosures and bail outs of large financial institutions and investment firms. Isn’t that the logical thing to do?
A solid U.S. candidate to head the World Bank would be good for the United States and the bank because the world’s largest economy should be represented in top international bodies, outgoing President Robert Zoellick said on Saturday, while emphasizing he has no role in the selection process.
“I want the United States to feel a sense of responsibility to the international system. So in that sense if you get the right American candidate I think that can be good for the United States and the bank.”
Of course,Zoellick, the outgoing chief, is himself an American. His predecessor was also American. (Paul Wolfowitz)I_ Do we now understand why the world’s economy is such a mess?!? I certainly hope Zoellick doesn’t think Doug Shulman or Timothy Geigthner would be “the right American candidate.”
Here’s a link to the article:
Here is a link to the template investment account opening form IIROC suggests for its members. Note the questions about citizenship. However, I cannot find where in IIROC rulebook there is a requirement that clients should be asked their citizenship. This is perhaps an area why that lawyer I suggested in Vancouver should take a look at.(In this case I am referring to invement accounts not regular bank accounts regulated under the Bank Act).
There are some serious economic problems:
Financial transactions work both ways. If the US withholds from Canadian banks, Canada could get the money back from US banks (in its borders). That will get Congress’ attention.
There is no due process. How can the US ask your bank for a % of your money without a court order valid in Canada. I do not see anyway that Canada would consent to such a thing, nor any European country.
Even in Switzerland, in situations where the US knows who the tax-cheater is and how much he owes, etc, there is nothing they can do. Switzerland might have turned over some names, but never any money.
I think it is an absurd request, but typical of the IRS to make preposterous requests. If even 10% comply it is a success to them, because before it was 0%.
As far as the size of the country is concerned, the Caymans is a country of 30,000, yet it routinely ignores the US govt, US courts, etc. Similarly for all Caribbean tax havens, Liechtenstein, Switzerland, etc.
An invasion would be absurd. On the contrary, the US sends the Coast Guard to patrol against drug runners, piracy, etc.
In a worst case scenario, one could move one’s money there. They know how to deal with IRS requests.
But in reality, all one has to do is deny he/she is a “US person”. Who’s to say who renounced his citizenship, when and where. I doubt the US keeps track of any of this.
The main issue for the IRS are US residents who file in the US, but only disclose partial information, not accounts abroad.
The intent of FATCA is to find those accounts and either scare the filers into disclosing, or audit them.
I read that the result is exactly the opposite. More US residents are opening offshore accounts precisely to avoid such-heavy handedness from governements.
M I like your style.
I can’t access your link. I would be interested in what it says. I would have to point out, she didn’t “ask me about citizenship” per se. I could be a citizen of anywhere else but the US and she wouldn’t want to know, but she asked me in particular if either of us (my husband or me) was a US citizen. I would be very interested in knowing the legal status of that question, for next time it gets asked of me. As I said, I’m not worried as it’s all on my FBAR.
I looked at the IRS page where they list agreements with various countries.
I can’t make head or tails of what the agreement with Canada means, since it mostly just refers to other documents, but I do notice it is “revised in Jan in 2012” Something going on lately that we don’t know about?
I’m not sure what happened to my link, but if you just copy and paste it it works
I can say at this point there is no Canadian legal requirement for a financial advisor to ask you specifically whether you are a US Citizen. In certain circumstances a financial advisor might required under IIROC rules(The Canadian self regulatory group for stock brokers)to ask your citizenship although I don’t believe you situation would apply to this scenario so your advisor is clearly following US directed not Canadian directed guidance.
@Tim – here at least, the KYC rules say to ALWAYS ask for nationality. Ditto for Euope, from my experience.
@Don – you’re lucky because you already have other passports. I told my wife tonight that we have to visit the PF this week to deliver my naturalization paperwork. Amazing… I started this process in December, and we already have all of the required papers (there are about 60 or more required documents, even city-wide credit checks!).
The US has maybe bitten off more than they can chew with this FATCA. I doubt they even have the manpower to cross-reference information sent to them from Canada + 5 EU member states. All this is, is a huge inconvenience for people like me. I have to naturalize where I live to protect my family here, but my American parents will always see me as an American, as their son. My parents love my Brazilian wife and little boy, by the way.
^^ See how stupid US rules are?
I think the Canadian KYC rules are somewhat unique although I believe the US itself does not ask for nationality at its own banks. I suspect one major cause is the fact that neither Canada or the US have a national ID card system. Right now there are about to 30 to 40 percent of Canadians without passports so I doubt this will change in the future and birth certificates are not really that good of a source of ID compared to drivers licenses.
(@ Tim) ííííí, sounds like Canada is about like the US on the passport / citizenship issue. By the way, ííííí, means something in English, that’s why I typed it here. Another one is Óóóóó which means “look look look”
Here, it’s pretty tight for revenue collection. Tax avoidance was so high in the past that now it is almost inescapble, and I recommend that the US implements a similar system. The taxes here are high, but avoidance doesn’t work. In the long-run, the uncompliant tax-payer is a nullified– can’t do anything. This is why I think if the US were better at collectiing taxes at home, they would leave the innocent people abroad alone.
I see that now, and thank God, my income is declared properly here because we are trying to buy a home. It’s simply not worth it to try to evade a few dollars of taxes. I pay at least 100% more in taxes than the average American. Americans should be happy they pay so little. If the rich ones want to evade taxes, then let them pay. The *ONLY* thing that I believe should be universal is an “escape fund” which I saw in the Tax Advocate” pdf. There should be a certain limit, $100k for example, that no one is supposed to report to anybody– that can be used if people need to move to other countries.
Financial Institutions Struggling With FATCA
“Two thirds of the survey’s respondents said they “have little or no visibility” on these compliance issues. Nearly half of the respondents said they are still learning about FATCA and have yet to actively implement compliance systems.”