Nigel Johnston has made a real comprehensive assessment of what it will take to implement FATCA, obviously something Congress didn’t bother with. When delving more deeply into its workings, there are more questions than answers and a growing frustration with the lack of guidance the US is providing for such a huge undertaking. Do we need any more proof how misguided and irresponsible FATCA is, especially with the current time constraints? I read elsewhere that to do a good job would take five to seven years, and the US wants commitment by 2013! Those 30% withholdings probably look pretty appetizing right now as they are almost within grasp.
I’m eager as anything to know what the banks will have to look for in their accounts holders in determining who’s a US person (indicia). Will an account holder need to provide his parents birth certificates? If not, surely many US persons will slip through the cracks, proving that FATCA is ineffective in achieving its purpose to flush out all taxpayers. Will everyone have to sign something stating they aren’t US persons? That would go over real well with regular Canadians. This is a bad dream I would like to wake up from.
Quite simple really… if you are a foreigner opening an account, it’s not uncommon to ask to see a passport. US passport = no bank account. If you are a local with a green card sticker, the government already has that information and passes it onto the banks, you are blacklisted before you even try.
You need to do your banking with a government owned bank, as they are exempt, and you need to do your banking in a country that can tell the us to fuck off without caring.
@harold, many US citizens have countries other than the US on their birth certificates and passports. There are also the snowbirds and folks who may have stayed a little too long in the US and meet the substantial presence test for taxation. The only good thing I ever heard come out of Rumsfeld’s mouth was ” the absence of evidence is not evidence of absence”, fits here. The account holder will be obliged to prove a negative. FATCA’s devil is truly in the details.
I am not afraid of Fatca because I have nothing to hide. They are going to spend a lot of money on people like me, for nothing. I do hope that after doing all of this and spending all this money they will not find the money they are after. They are only make a lot of money if they remove the exclusion and the tax credit… This will be double taxation, in other word, stealing. Just want to wait and see.
Oh yes, they may get some money from Americans Abroad who did not know about FBARS (the great majority). If this is what they are counting with they are criminals. Bait and switch…
@thatisme, I’m under the impression that the cost of FATCA is being pushed onto the foreign financial institutions. Won’t they bear most of the costs of rooting out the low value taxpayers?
For those of you getting caught by the paywall, see this link for the original (Mondaq.com really irritates me, they scrape freely-available content and stuff it behind their paywall in order to trick people into paying for it):
http://www.mccarthy.ca/article_detail.aspx?id=5798
@bubblebustin: this is why FFIs are all pushing so hard for “country to country” agreements: they think it’ll just let them dump all of their account data on their national governments and let them sort it out. At taxpayer expense, naturally.
@Harold: government-owned banks which open accounts for members of the public are no more exempt/”deemed compliant” than any other FFI. Only accounts which are owned by the government (e.g. if your country’s Ministry of Transport has a bank account used for payroll and for buying equipment), and foreign central banks, are exempt.
Thanks Eric for mining the article out of the paywall 🙂
I couldn’t give a FATCA about the IRS.
The real battle begins when they try to withhold the 30% on US-sourced payments, but more importantly when they try to hold the 30% from a FATCA-FFI to a non-FATCA FFI which is not even located within the US.
For example if you have a payment from TD Bank (presumably a FATCA bank) to a non-FATCA Canadian Credit Union within Canada, the IRS would expect TD Bank to withhold 30% for a payment that originates within Canada (because the Credit Union is non-FATCA). This would also apply if TD tries to make a payment to a Canadian FATCA bank to an account that is “recalcitrant.”
I believe all this is going to start in 2017 in earnest – that’s when the outrage will begin. Up until 2017 it’s basically a reporting issue that you can be a recalcitrant account because it has no financial bite and say “two fingers” to the IRS because Canada won’t collect FBAR fines.
To complete “citizen protection” Canada is going to have to instruct its banks not to withhold any money for the IRS within Canada. Canada can’t do much if it’s a US-sourced payment (which you can divest from the US and buy a substitute Canadian investment).
The negative effect for the US will be when people decide to sell and pay the US capital gains and divest or when their positions return to near “break even” or some acceptable level. As the Dow gets toward 14,000 that incentative will increase (presuming people’s positions are getting near their level before 2008).
Renunciations will increase after 2013 and a second wave after 2017 after the pass-thru payment provision supposedly comes in for the non-FATCA world.
The government is going to have to deal with discrimination on at least two fronts:
1. A Canadian citizen living in Canada who is an immigrate being subjected to FATCA reporting while another Canadian immigrate (born abroad but not in the US) not having to report. Discrimination by place of birth.
2. “Foreign born” US citizens can evade FATCA by walking into a bank and deny they’re US citizens and get away with it. One group of people able to evade the system by not being born in the US.
….Happy Days going forward!
FATCA is a dream-come-true for the big consulting firms. All of them work with the CDN Banks. I still guesstimate $100 million to implement FATCA in each chartered CDN bank (at the expense of all customers and CDN taxpayers). I believe the following link supports my suspicions and provides some details on implementation which you might find helpful.
http://www.accenture.com/us-en/blogs/regulatory_insights_blog/archive/2011/12/14/fatca-implementation-upcoming-challenges-for-2012-and-beyond.aspx
@john, doesn’t #2 make FATCA unenforceable, or at least very dangerous for the FFI’s? It’s one thing to be a toxin with warning labels, but what about these hidden toxins? What kind of mechanism can the banks have in place to identify these US persons without putting the average citizen through the wringer? FATCA will NEVER be leak-proof for this reason and FFI’s will forever be vulnerable to becoming instantly non-compliant if any hidden toxins are found to have seeped through. There will be no peace until every US person is exposed, which is impossible when many of these hidden toxins don’t even know they are toxic!
@CanadianPat, having worked on a FATCA programme, I can confirm that if you were to do it properly from end-to-end (which the bank I worked at chose not to do), the implementation costs would be about four times that much for a large bank with major legacy systems.
FATCA: Foreign Americans Turn Carcinogenic Agents.