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
If there was ever a doubt that FATCA is the Tip of the Spear for a GATCA, a global tax exchange, this should remove it.
Foreign? There’s no ‘F’ in FATCA
Why does everyone keep forgetting – it’s only the US that is interested in citizens – ROW is only looking for tax residents
p33t
No one keeps forgetting it here, but certainly the FCC, the Fatca Compliance Complex seems to over look that fact. And, of course, the worlds masses and the so called journalist that inform it, have no idea that this GATCA is being created while they sleep.
*I blame it on these “career” civil servants not just in the US that guard the “integrity” of the income tax night and day like Knights Templar.
*You should watch this video below:
The person speaking is Reuven Avi-Yonah. Some of you may remember he published a paper a while back encouraging the US to move to a residency based tax system. He still seems to be committed to the cause however, he has some other really radical ideas. FATCA in his opinion is a good thing because it is causing people to renounce their US citizenship and prove a point to Congress. He personally if he lived outside the US would renounce his citizenship. It is actually more important to implement residency based taxation for individuals than territorial taxation for companies.
I’m a US citizen and have worked in or around the IRS information withholding and reporting regulations in private banks. I, too, am stunned that head of Treasury would believe FATCA is the best way to go about chasing US tax cheats (I call it chasing lizards…you can catch a few but you’re left holding a section of tail while the lizard goes squirming under another rock). It’s been a struggle to get US banks into compliance with 1998 regs on NRA and 1099 withholding and reporting – high costs for new accounting systems, operations staff, etc. I can’t begin to imagine replicating these same procedures in every international bank worldwide that holds US clients. AND, although the mainstream press has tried to touch on this story, no one seems to be paying attention. Maybe now that the election is over? Perhaps, perhaps, perhaps.
*
*Cathryn Phelps
In a country like Canada I don’t even know how legislatively graft FATCA on top of the existing income tax act reporting requirements. There is no legal definition in Canadian tax law of “US Person” and to legislate such a definition might very well be considered discriminatory.
@Cathryn Phelps
Welcome to IBS. I just sent you a message privately, and look forward to your other insights and comments, if you have the time or inclination. The more we know about what is happening, the better the efforts at moderating this monster! I almost wonder if the FATCANATICs have lost control of it, or understand the impossibles it creates, like this one Calgary 411 posted, which is in a thread that you might find interesting..
@Cathryn Phelps
Do you know how much of a concern FATCA reciprocity is to US banks? Is there a real lobby against this law, or are they satisfied with the secretary’s answer to senators saying that there won’t be any new requirements on US financial institutions until new laws are passed?
Hi. I will be attending two FATCA related conferences in NYC this month so will be able to pose these questions while there to experts who are better suited to answering. I’ll keep you posted. Personally, I think everyone is concerned about “Thirty percent withholding on all US source dividend and
interest payments plus the gross sales proceeds from sale
of asset ending in US source income paid to
“recalcitrant” account holder, “non-participating FFI” or NFFE that
has not disclosed its substantial US owners.and difficult to enforce.”… and operationally difficult to implement.
@Cathryn Phelps
@Christophe
Re Christophe to Cathryn Phelps: “Do you know how much of a concern FATCA reciprocity is to US banks? Is there a real lobby against this law, or are they satisfied with the secretary’s answer to senators saying that there won’t be any new requirements on US financial institutions until new laws are passed?”
If I may, the short answer is No. You will notice that the vast majority of news and commentary on FATCA is in non-US media, and hardly any any of it focuses on obligations IGAs would impose on domestic US industry. Even the Senators’ letter to Geithner generated little media and his non-response none. That’s not surprising. Media attention doesn’t happen by itself, it has to be worked — which means impacted industry would have to put some money into the game to start getting an anti-FATCA perspective into play. That hasn’t happened yet, though. From my industry contacts to date, banks have declined to engage on FATCA generally though some have weighed in on issues that touch on FATCA, like the non-resident alien interest reporting requirement. In general, they remain remain paralyzed at Square One: “Well, we don’t really want to be seen as supporting tax evasion.” (That’s kind of like saying we shouldn’t have opposed Prohibitionism and all its unintended effects because it might look like we’re supporting alcoholism.) As for US non-banks (pension funds, insurance, investment, etc.), there’s little evidence they’re following this much at all or appreciate the magnitude of the train heading down the tracks toward them.
@Jim Jatras.
Excellent points. I do think @Cathryn Phelps probably correctly identifies where the focus is right now for all those FFIs. Panicked as they are at that 30%. And all the FCC (FATCA Compliance Complex) panics them more, with the constant harangue to not delay and get busy preparing to be compliant. Fear of loss to US market access drives everything. Thus their rush for what they wrongly perceive, in my opinion, the salvation of IGAs. As I often say, they haven’t lifted their heads out of their spread sheets yet to see the broader implications.
FATCA begets DATCA begets GATCA! I don’t understand yet, why the US banks, with the exceptions of Florida and Texas have not focused on how onerous DATCA can be for them.
Just adding this from Steven Mopsick blog..
http://mopsicktaxlaw.blogspot.com/2012/11/commissioner-shulman-retires-after-five.html
Even Steve sees GATCA in the works, under the name of ‘automatic information exchange’…
Someone else is beginning to understand the BIGGER GATCA story…
http://www.iexpats.com/2012/11/fatca-digging-out-facts-about-the-global-tax-network/
Also, I took the opportunity of Robert Woods Post on IGAs to paint the FATCA-DATCA-GATCA story in comments.
More FATCANATICs applauding the creation of GATCA Just in case there was any doubt what FATCA is about.
GFI Applauds Treasury for Work Expanding FATCA toward Automatic Tax Information Exchange
And what I have feared most out of FATCA to GATCA evolution. Here come the copy cats.
Exclusive: UK to impose son of FATCA on Crown Dependencies, despite government’s denials
A leaked government document seen by International Tax Review reveals that the UK is planning to impose its own version of the US Foreign Account Tax Compliance Act (FATCA) on its Crown Dependencies and Overseas Territories. The move will deal an almost fatal blow to tax evasion through the UK’s Tax havens.
Pingback: The Isaac Brock Society - Question: Are these FATCA IGAs considered a Tax treaty or not?
Another story on UK FATCA…
Treasury to crack down on UK’s offshore tax havens
“It’s a complete bombshell for these places,” Richard Murphy, a tax expert who has seen the draft plan, told the Observer. “Some people will try to flee, but this is going to change the whole of the offshore market.”
He explained that the draft plan amounted to the UK using US legislation to give tax havens an ultimatum: “It’s either they give the UK the same data that they want to give the US or the UK won’t pass their laws to let data flow to the US.”
@Just Me, The UK already has the EU savings directive, which the British territories already implement. It’s not possible for a resident of the UK (or any other EU country) to evade taxes by hiding money in the Isle of Man, Guernsey or Jersey (and many other alleged tax havens). The British government clearly declared that it does not want a British version of FATCA, I think the reporters are mixing things up.
Although things would be much easier if every country had territorial taxation and stopped being obsessed with income generated outside its borders, I don’t think GATCA is the end of the world as long as countries tax only their residents. If FATCA only applied to US residents, we wouldn’t be having this conversation.
@Tim, Thanks for the link to the video (I only saw it now). Among tax experts, Reuven Avi-Yonah is probably the strongest critic of citizenship-based taxation. I don’t think his ideas are radical, they are rather simple like having the same tax rate for everything.
You are right, it is actually more important to implement residential taxation for individuals than territorial taxation for corporations. That’s what I’ve been trying to tell congressmen, but they seem to have lost any concept of fairness, logic or simplicity, and only seem to be interested in fantastic estimates of overall economic effects.
*One of Reuven Avi-Yonah proposals tied to his residency based taxation system for individuals is to have “residency” based taxation for corporations. US Corporations are only US corporations if the are actually legally incorporated in the 50 states or DC. In Canada corporations are “resident” in Canada based on whether their headquarters and management is located in Canada. So a company can be legally incorporated in Bermuda but has its headquarters and management in the US and yet be exempt from US tax other than on its US source income. Now in Canada Canadian “resident” corporations are exempt from Canadian tax on their “active” foreign income in most cases but not on their “passive” foreign income. Canadian residents companies also pay a 25% tax rate on their Canadian source income compared to a US 36% rate on US source income.
Worldwide vs. territorial, incorporation vs. management, active vs. passive income. It nauseates me how all those supposed experts on taxation spend so much time and money discussing the minimal details of the corporate tax, and almost nothing on the basic ideas of the personal tax. The answer is simple: corporations are not people, they don’t reside anywhere. Abolish the whole corporate tax already, and instead of exempting dividends (which are the distributions of corporate profits) from personal tax, just tax them as regular income of individuals. That’s what Estonia does, and look at its GDP growth rate and government debt.
@Shaddow Raider.
Well, maybe the reporters are mixing it up, but that is two stories based upon the same narrative, so I would not dismiss it as just reporters confused.
The one out of the International Tax Review has the most credibility. You wouldn’t expect them to make a simple analogy mistake.
http://www.internationaltaxreview.com/Article/3121964/Latest-News/EXCLUSIVE-UK-to-impose-son-of-FATCA-on-Crown-Dependencies-despite-governments-denials.html
After hearing about Reuven Avi-Yonah here at IBS I decided to see what google has to say about him. I then found this interesting paper.
Citizenship as an Administrable Proxy for Domicile
*shadow raider
What happend to this idea?
A coherent policy proposal for U.S. residence-based taxation of individuals.