I found an interesting article on FATCA at Financial News this morning that for an “industry” publication is the first I get some sense that they are getting it. A couple of interesting quotes:
“Once countries have got the structure in place to comply with US Fatca, their governments won’t just say, ‘we’ll bear the costs of helping the US gather its tax and leave it at that’. Something will happen.”
That “something” will not be a repeal of US Fatca, Fleming said. The realistic options, he said, are either that every country develops its own version of Fatca, or that a “global Fatca” is developed, where every country has to disclose the assets of every other countries’ citizens under a common framework. He said: “There will have to be a ‘global Fatca framework’ – the alternative is even worse. We couldn’t operate on the basis of 27 Fatcas in the Europe Union, say.”
The significance is enormous, he said: “It will be a global tax system. It is impossible to comprehend how you maintain national tax integrity under such a system; how you get to a global Fatca is an immense challenge.”
A few points they seem to be making:
Many in the financial industry are increasingly taking the view that FATCA and any copy cat legislation is going to be an overriding issue for the rest of the decade.
In closing the authors state that they in fact think the US is playing a “long game” of trying to determine the world’s taxation model.
Unfortunately this article now seems to be pay-walled, but you can sign up for a free four week trial.
http://www.efinancialnews.com/story/2012-03-27/fund-managers-predict-global-fatca
There is just one problem in the global FATCA world, the US uses citizenship based taxation, the rest of the world uses residence-based. The tax revenue “pot of gold” is never going to be the same for residence-based countries as the US (as long as the US’s citizens abroad agree to comply), and then you have to throw in the issues of citizenship etc.
It still comes down to the US doing more work than the other way around and its going to hit up against resistance.
The contender is China, if China doesn’t comply and the US doesn’t enforce the 30% withholding, why should the rest of the world follow suit?
What the US wants to do is the equivalent of a man who wants to practice polygamy. He gets many wives, they only get one husband. This *&%@ is not going to fly.
They got away with this before because they only targeted the rich, now that they’re going after ordinary folks in other countries there will be alot of blow back.
@Tim… This confirms for me what I have been saying, that we are in the process of creating a world wide tax data exchange regime, and the implications and consequences of that have yet to be determined. One thing we know for sure, it will have many negative unintended consequences that will lead to books 20 years from now, looking back and asking “How did it come to be?”
And of course, the US media is totally silent, as they are only interested when the financial train wreck happens, not when the CDOs (collateralized debt Obligations) and CDSs (credit default swaps) are being created.
History is in the making here. Move over, as this force of nature maybe unstoppable now that the USA has unleashed this Jeannie from the bottle.
Carl Levin is leaving a real legacy! .
@JustMe
I think if you read many of the industry publications there is an increasing sense of panic in terms of actually how to implement all these requirements. I am not sure why this wasn’t displayed earlier but it wasn’t.
Maybe this might wake people up. Whatever happened to privacy?? This sounds like a long pendelum swing!! I think the person who wrote that info. was day dreaming. The countries are not footing the bills, the banks are.
@Tim…
I try to read as much as I can, and appreciate you posting these types of stories that I haven’t yet got to or find. I still am trying to figure out why this story is not getting any attention in the MSM. NONE! Nada? Have you seen anything that I have missed?
I wanted so badly to add this to the comments earlier, but I had to go to work. Somebody else on here said once that it is very common for immigrant communities in the US to put money into the names of family members. Well guess what! That’s what nearly everyone does here!! We even have a name for these people. They are called “Laranjas” – (oranges)! The US tries to curb this with gift tax limits to family members, but I *BET* [know] that it still happens in the US too.
Many countries already have exchange controls in place to make sure that there are not violent swings in their national currency. The FATCA is exactly that – something to monitor dollars going out. Amazing isn’t it? Back in the 1970s – 1990s (and till today for CHINA!), the US was always pressuring countries to freely float their currency, and now the US is trying to control their own currency!
The FATCA is yet ANOTHER case of the US changing the rules of the game whenever they see fit. Who cares if the minnows are trampled on by the backhoe! <- at least that's how Congress, the other policians, and the IRS see it.
@John – laws can change. Sarkozy is proposing a citizenship-based taxation for the French. Will it fly? Maybe.
What a global FATCA framework will do is give countries information about what is out there. For example, there are hundreds of start-ups in Silicon Valley run by French expats. Now I think it’s reasonable to assume that there’s money there but the French gov today doesn’t know how much. Data exchange would give them that information so they could go to the lawmakers and say “see, look at all the revenue we are missing out on because these people don’t pay French taxes. They may be living in the U.S. but they still have French passports and should pay something in the name of solidarity.” I think this argument would be VERY popular in France and in many other countries as well.
Just my .02.
Victoria, I think you might be on to something here, and Andy Sunberg’s Orwellian scenario (written in a deliberate hyperbolic manner) might be closer than we think…
http://isaacbrocksociety.com/2012/02/16/what-is-the-systemic-risk-to-the-worlds-economy/
This statement from the Financial News was really a telling one, and confirms that others are thinking what I have been thinking for some time. They are much better positioned than I to make that analysis.
Again, why this doesn’t get discussion in a broader media amazes me. Those that are thinking this, and identifying the trend towards Global Tax regime are not without influence or connections. Who are they talking to? So where is the story in the NYTs, or NBC nightly news.. ??
“He said: “Once countries have got the structure in place to comply with US Fatca, their governments won’t just say, ‘we’ll bear the costs of helping the US gather its tax and leave it at that’. Something will happen.”
That “something” will not be a repeal of US Fatca, Fleming said. The realistic options, he said, are either that every country develops its own version of Fatca, or that a “global Fatca” is developed, where every country has to disclose the assets of every other countries’ citizens under a common framework. He said: “There will have to be a ‘global Fatca framework’ – the alternative is even worse. We couldn’t operate on the basis of 27 Fatcas in the Europe Union, say.”
The significance is enormous, he said: “It will be a global tax system. It is impossible to comprehend how you maintain national tax integrity under such a system; how you get to a global Fatca is an immense challenge.”
The implication for the asset management and related industries would be huge. Fleming said: “We will have to redesign the flows of information all the way through the supply chain. It will completely change the way we do business, and move us to a degree of transparency that is currently unimaginable. It also means a complete change to the global custody and fund distribution industries. The cost, across the globe, will be billions of dollars.”
The developement is not far off, Fleming warned. He said he anticipated the change within just a few years: “I cannot see the governments of the world just tamely putting up with US Fatca for as long as 10 years.
“We have three to five years while we implement the US Fatca. We will get lulled into a false sense of security while we focus on the details, but in that three- to five-year window, things won’t stand still.”
He said he thought the US authorities had foreseen this. By imposing its own Fatca first, the US will have set the template that every other country will follow. Fleming said: “Why did the US impose Fatca on the globe? I think they are playing a long game.”
Again, another reason to stay informed and not pull a full Ostrich. Voluntary compliance is soon not going to be a choice if these guys have their way.
@Just Me: Wow. That is a really interesting analysis. I’m no expert in this domain but it makes a lot of sense. I think the U.S. is playing with fire however. The U.S. is a “settler country” like Canada or Australia. There are huge numbers of people who have foreign parents or grand-parents. In a “tax the diaspora” game settler countries stand to lose big because their citizens could be tapped as citizens of their ancestral countries and theoretically taxed as well. I don’t know what the reaction to something like that would be. It might cause some Americans to migrate back to their parent’s or grandparent’s home countries. I get a lot of inquiries from Americans in the States who want to come to the EU. If they knew they had that option then perhaps Europe could solve some of its demographic issues by informing them that they could have EU citizenship if they wanted it. I just met one such person the other day – she’s a US citizen who is activating her Polish citizenship so she can stay in the EU.
@Victoria
Thanks for your contributions — your site and this and others.
For great analysis, your recent Parts 1 and 2 of “stakeholders” are must-reads.
http://thefranco-americanflophouse.blogspot.ca/2012/03/diaspora-tax-war-of-2012-stakeholder.html
http://thefranco-americanflophouse.blogspot.ca/2012/03/diaspora-tax-war-of-2012-stakeholder_27.html
I’ve said this in another thread, but I’ll say it here again.
Even the President of the US and his family would be affected by a global FATCA. Obama was born in the US to an American mother and a Kenyan father. His mother also took out citizenship for him in Indonesia when he was a child.
So, using similar criteria to US, Kenya could claim Obama as a “Kenyan person” and Indonesia could claim him as an “Indonesian person.” Under Global FATCA (which I will now call (GATCA), Obama’s American financial institutions would be required to report Obama’s financial holdings to the governments of Kenya and Indonesia. If he holds joint bank accounts with his wife or has education savings plans for his daughters, those would also have to be reported under GAFTA.
Of course, if GATCA is designed like FATCA, financial institutions would also be required to report on any financial transactions which the President of the United States has signing authority for.
Obama’s half-sister, Maya Soetoro-Ng, was born in Indonesia to an American mother and an Indonesian father. So, Indonesia may consider her an “Indonesian person.” Her husband, Konrad Ng is now a US citizen, but he is also Chinese-Canadian. So, under GATCA, American financial institutions would be required to report to the governments of Indonesia, China and Canada on the financial assets of the President’s sister and brother-in-law. Their children could be obligated to report to US, Indonesian, Chinese and Canadian governments.
Why can’t anyone see how insane this is? As Victoria said, countries with high immigration rates, like US, Canada, Australia, etc. will be the most dramatically affected.
@Calgary411 – Thank you so much for your kind words and for linking to the Flophouse. It is a real joy to be a part of Isaac Brock and to meet people like you.
@Blaze – Great analysis and example. But all entirely within the realm of possibility.Just for fun I checked to see how Americans can claim German descent. According to Wikipedia a whopping 50 million (about 17% of the US population). I wonder what the odds are that Germany would turn around and tap them? 🙂
Oh the cat would really be among the pigeons if countries started playing this game….
@calgary411
Here Here! I love reading Victoria’s commentary! Thanks for highlighting it. I wished I could/would spend as much time as she does in thoughtful reading!
@Blaze GATCA. I love it. FATCA, DATCA and GATCA. It just keeps multiplying! Thanks for re-posting your comments. You make good points.
So, would Carlos trim GATCA?
Would Carlos Slim Trim FATCA? Fat Chance
http://www.forbes.com/sites/robertwood/2012/03/28/would-carlos-slim-trim-fatca-fat-chance/
Well, couldn’t help my self. I just posted this comment on Robert Woods latest piece on FATCA
http://www.forbes.com/sites/robertwood/2012/03/28/would-carlos-slim-trim-fatca-fat-chance/
Biblical Progression. In the Beginning… FATCA beget DATCA beget GATCA.
We are progressing through the stages of the creation of a Global Tax data exchange with government to government reporting on all citizens / residents in a brave new world.
Carl Levin launches FATCA as an amendment in the 2010 Hire Act.
The IRS responds with the Domestic equivalent (DATCA) requiring all banks to report on non resident interest to the IRS for sharing with the world.
Then, the 5 nation EU agreement puts in place the framework for a Global tax data exchange (GATCA) that other countries will fall into line with but a whimper of a “Complain by Comply” protest.
A sea change is happening, and Robert, you are one of the few that are reporting on it in a meaningful manner. Thank you.
Some hedge managers are waking up to this too. Google “Fund managers predict ‘global Fatca'”
I hope someone with influence is looking at this and asking where are we headed and what is the consequence of these actions? Congress obviously is not! Neither is the President. 20 years from now, someone will be looking back and writing a book about “How did it all happen?”. Yours will be a rich resource.
Regards
@JustMe: Your DATCA was my inspiration for GATCA.
@Blaze…
I have used GATCA about a dozen times this morning. I don’t know why I didn’t think of it, but never mind…. It is a good one, and thanks for sharing it….. I do extend credits where credit isdue! 🙂
People who want to evade taxes will not be deterred by FATCA, DATCA or GATCA. It’s mostly law abiding citizens that are being terrorized by this stuff. The crooks will just get more creative.
The key to success in the military and the financial world is the element of surprise. Who the hell hasn’t seen FATCA coming?
If you’re a rich guy and you know your bank might report you to some tax authority, you’re not going to sit around waiting for it to happen.
I think this is a no win situation for all tax authorities worldwide.
@Just Me
Regarding the reason why all of this is not covered in the MSM:
Perhaps overly-simple, but the average, even reasonably-educated person in the US, would likely not understand what they are talking about. I wouldn’t either, if I hadn’t been dragged into this mess.
@nobledreamer
Unfortunately that is true. It is not a simple story, hard to understand, and I never thought I would have been interested either. Nothing like a $172K penalty to get your attention! 🙂
Also, when you have such a high portion of the US population not paying income tax now, what do they care? It is like our voluntary and contracted out military. Doesn’t effect us anymore, so no interest and no protest about wars either.
We need simple talking points without acronyms that can resonant and begin to get attention. Anything with Tax in it is an immediate turn off. We need to replace it with Sex, and then maybe that would work…Need the help of a Frank Luntz type…
btw,l thanks for the tweet.
https://twitter.com/#!/nobledreamer16/status/185114564969500672
Suggestion, I keep looking for things that are trending that I can insert something into the conversation, like #IfIMeetJustinBieber. Silly I know, but that may be the only way you will hook some of the disinterested. Also I keep copying in news organizations that interest me, and I hope someday they will wake up and read the FATeaCa leaves like @nprnews or @mktplaceradio or @planetmoney.
I should try some others. Just thinking out loud now, I might try targeting Democracy Now. They are way to the left, but like to cover issues of government abuse, and often lead the mainstream on breaking news. Might look into that, as national public radio is disinterested apparently. http://www.democracynow.org/ FATCA or FBAR search of their web site turns up nothing either. Ok… time for me to start hitting them with unsolicited FATCA spam… LOL
@Just Me – We are thinking along the same lines. I’ve been talking to a family about this. He’s been involved in homeland politics for many years and has been and aid/advisor to politicians in his state. He says (in a nutshell)
1. we need a message that is simple and compelling. We have to strip out the complexity and come up with something that can be summed up in a 3 minute elevator speech
2. we need people who can talk to the media. Harder then it looks. He says you have to keep on message even when the reporters try to sidetrack you. I’ve seen that happen in at least one interview about this – the person on “our side” never gets enough time to tell the story. See 1 – our story is probably way too long.
3. we need to build a coalition and we all need to be singing the same tune. Look for allies – even people you don’t like. Doesn’t matter if you like them. If they are willing to support you, take the help.
4. Politicians won’t even open their door in most cases unless you can demonstrate that you have x amount of money and can deliver x number of votes. So we need either a fund of some sort (PAC) or we need to show that there are a substantial number of votes at risk. This will get their attention.
Oh and he strongly suggests that we get professional help. We need advisors and these can had pretty easily but it will cost. No one is going to help us for free.
Interesting game, isn’t it?
@Victoria…
It is indeed an interesting game, and an expensive one if you want to be effective. I wished there was a Kony 2012 type video that would go viral, but FAT chance of that. There isn’t capital punishment associated with FBARS and FATCA yet.
Thanks for the pointers. They are good ones. After I return to Fubarland in May, I might work on this full time as a project, well when I am not scrapping and repainting my mother’s house!
Well, here is something else that Carl Levin and the IRS will ignore…
GAO: Foreign Account Reporting Makes Extra Work
They don’t care!!
http://www.accountingtoday.com/news/GAO-FBAR-IRS-8938-Form-FATCA-Government-Accountability-Office-Treasury-62218-1.html
“A recent report from the Government Accountability Office found that the Internal Revenue Service’s Form 8938 and the Report of Foreign Bank and Financial Accounts, or FBAR, are “duplicative,” often asking for the same or similar information.”
Oh really?
@Just Me
Aha, I wondered about that Justin Bieber thing (!)….being so new to this, I have yet to figure out much beyond actually how to DO the tweets……. will keep plugging away and thanks for the suggestions, will see if I can manage 🙂