From Accounting Today, Michael Cohn reports that the IRS Issues FATCA Guidance on Reporting Interest Paid to non resident Aliens
The Internal Revenue Service has issued final regulations and guidance on reporting interest paid to nonresident aliens, along with a revenue procedure listing the countries with which the U.S. has a bilateral exchange of information agreement.
So, the speculation that DATCA would not survive might be pre-mature.
The last brick in the foundation of the global Fatca (GATCA) is being cemented in place.
FATCA begets DATCA begets GATCA
I have posted this response. Â You all are welcome to join in..
Well Michael, I see that DATCA is still not dead. Will be interested to see what the Congressman like Rubio,Boustany,Ron Paul,and the entire Florida delegation that were opposed to this will do. Do I hear “nothing”?
Obviously their letters of protest have had no effect on the IRS or the administration.
As we know, the IRS needs this to make the FATCA reciprocal Tax exchange regime work! In their statements now they are no longer hiding the objective as they were last year. They make it clear that it key to their strategy to overcome FATCA opposition around the world. A global FATCA is being created, and you are one of first and few to know. 🙂
I was watching Fox’s Sunday news show and they were talking about Rubio becoming Romney’s running mate. As soon as they brought him up I thought about Rubio’s opposition to DATCA and wondered what would happen if he were to be chosen as the vice presidential candidate?
@recalcitrantexpat…
Color me skeptical that it would make any difference. His opposition to DATCA as evident in the Miami Herald piece would morph. DC changes people… It is BIGGER than the individuals.
A destructive IRS mandate
http://www.miamiherald.com/2012/03/07/2681514/a-destructive-irs-mandate.html
I would love to see the list of countries that accepted the treaty.
@Thatisme
Canada already gets info on its resident who have US accounts and is still opposing FATCA. So I am not sure this move will be as successful as they seem to think.
Republicans Abroad are clearly agains FATCA, FBARs and all. I will have to review being a Democrat for so long. Insofar as the the bilateral exchange, all other countries are not not interested in what their citzens living and working in the USA (Green Carders and Dual Citizens) are earning and investing in the USA. They use residency based taxation. They might be interested only in their own citizens living in their country who have bank accounts in the USA.
There is a big difference there…
@Thatisme
The 5 countries that have signed on to the reciprocal agreement with the IRS as a substitute for FATCA are UK, Spain, Germany, France and Italy. Israel is seriously considering it as are others. I think they would be waiting to see if DATCA is instituted as the IRS is planning by regulatory authority, or shot down by Congress. That would have to be the Republicans doing it.
@justme, @thatisme- I would be curious to see what the terms will be by which the IRS will decide the conditions under which it will pass on information and what information it will pass on.
I, for one, can’t see the U.S. sending along any meaningful information because of the U.S. obsession with maintaing its special sovereignty that it shares with no other country.
@recalcitrantexpat
What information does the IRS send to the CRA right now? Assume it would be similar.
@justme- I don’t exactly know other than the normally recorded financial information such as interest, capital gains etc. What is up for debate is also “who” will get the information.
The U.S. considers itself to be the world’s appointed defender and promoter of democracy so what happens if this information is requested by a government that the U.S. doesn’t like? Would the U.S. comply? I think not. I have no doubt that the Congress wil require that any information sharing agreement mandate that the U.S. need not cooperate with a government that it believes behaves contrary to U.S. interests.
Now that is a very broad escape clause and I don’t believe that America will sign any agreement that does not include such a clause. Now of course countries that historically have a long tradition of democracy won’t see this as a problem but what happens with other young countries, such as those South of America, that have a history of instability and dictatorship? I can see them having a reasonable fear of U.S. capriciousness being exercised when they request such information.
Of course this is all speculative on my part. But I don’t believe that the U.S. has ever signed an agreement where it didn’t reserve a way out.
What does DATCA stand for?
Just for fun I found this very good draft paper by a fellow named Itai Grinberg at the Georgetown University Law Center called Beyond FATCA: An Evolutionary Moment for the International Tax System. Fascinating stuff. Give it a read here
@victoria- I just started reading it and already on the first page I noticed this passage:
“Four incongruent initiatives of the European Union, the OECD, Switzerland, and the United States together represent an emerging
international regime in which financial institutions act to facilitate countries’ ability to tax their residents’ offshore accounts.”
Notice the author’s reference is to the offshore accounts of their “residents'”. If your aren’t a resident of the U.S. then FATCA should have nothing to do with you. So why has the U.S. opted to act otherwise?
@Jefferson D. Tomas
DATCA was my short hand acronym for a Domestic version of FATCA. I preceived this was in the works when I first read this story last September and realized what was up with the IRS mandate for US banks to report on non resident interest. The light when on for me, and I speculated then, that this would be the tool they would use to trade tax data information with other countries to over come FATCA resistance around the world. Now, they openly admit, in this article, that this is what it is about.
Here was the article that originally got me thinking about it,
Congressman Tells IRS to Back off on Bank Disclosures
and here is the first time I used it here on Isaac when I posted the letter of opposition by the Florida delegation which was written to Obama and then referred to DATCA multiple times the comments.
Treasury, IRS Issue Proposed Regulations for FATCA Implementation
Hope that helps… I should spell it out, and not use acronyms and assume everyone understands me… 🙂
@Victoria…
Thanks for that. I have downloaded it from your blog link, which was, btw a very good prepsective on FATCA. For readers who haven’t read it, they should go to..
Some Perspective on FATCA
Also, I especially liked your conclusion about replacing “Repeal FATCA” with “Mitigation for Minnows.” I do tend to agree that this FATCA train is not going to be derailed. Too many governments looking for revenue, and unless we are about to enter a new age of trade barriers and financial islands of isolation, the trend is against anyone stopping Carl Levin”s dream world.
@recalcitrant
The reason for the mention of offshore accounts of residents is quite simply because out here in non-residential-alien-world governments only tax residents (not citizens) and so the only useful information to any other government would be on such accounts in the US. The US of course, taxing on citizenship, is interested in their citizens wherever they reside and earn their money. It is a direct reciprocation, it just looks unbalanced because of the unbalanced US tax law.
Hi recalcitrantexpat, Good question. Probably has to do with the US’s odd relationship with its diaspora. (I’m speculating here). If you look at France, for example, they have formally recognized that (gasp!) people leave the country all the time. There is a procedure for leaving and there are websites and institutions that are there to help French expats and ensure that they can vote and are aware of their representatives. Check out the Maison des Francais de l’Etranger http://www.mfe.org/
US doesn’t do anything like this. It’s not that they actively deny the existence of Americans Abroad, they ignore us and make up stories about how we are only “temporarily out of the country.” If that is indeed their perspective then yes it makes all the sense in the world to treat Americans abroad in this manner. Since we are “temporary” then our local accounts are indeed “foreign.” That is my take on it anyway.
I believe that as long as we allow these myths to stand, as long as we deny that we are a diaspora, as long as we do not take the lessons learned from other diasporas, then I think this situation will continue indefinitely with us reacting “after the fact” to every idiot law that comes out of Congress. We must create a unified movement and play domestic politics from a position of force and power (shove our existence in their faces with data and publicity and a relentless hammering of every idiotic stereotype in the media). We are going to lose the FATCA battle (though we might gain “mitigation for Minnows”.) That is my honest take on it. From it however we can live and learn something. I’m reading about other diasporas and their histories right now and, believe me, their positions vis a vis their home countries were once just as weak as ours. It is fixable. And I think it starts with demanding (not requesting) FORMAL recognition from the home government and institutions through which we can work and be represented and negotiate. The French actually have a “Secretary of State to the French Abroad”. No reason we couldn’t have the same thing. I even wondered about crashing Clinton’s IDEA alliance and forcing her to deal the issue of an American diaspora overseas in conjunction with her work with diasporas from other countries within the US. I fear however that we are not yet ready to go there. In fact, I think that even though we are being hammered, we won’t see the need for this until it is too late.
Sorry to ramble. Just my .02.
@Just Me Thanks so much for your comments and for posting the Flophouse link. I loved that article and I think it’s a very cold and clear view of the situation.
@p33t: Just because that is the situation right now in these countries does not mean that it won’t change. They may have judged in the past that it was too much trouble to tax their expats but, give them a mechanism for doing so and I think they will. France seems to be moving in that direction. Sarko wants to do this and so does the Socialist party. There seems to be a consensus that this would be “a good thing.” The difference, however, between US and French expats of course is that the French actually have institutions through which they can fight back.
If I can put aside for a moment the steaming pile that FATCA really is, what really incenses me is how DATCA is faux reciprocity.
Under FACTA, if an American citizen living in NZ has bank accounts in both USA and NZ, then the IRS gets income information remitted directly from his NZ and USA banks. Under DATCA the NZ govt gets information remitted from the NZ bank for that person (as currently), but would have to go begging directly to the US govt for information on that specific person’s USA accounts. The administrative burden on the NZ govt is as much as before, and the USA govt will probably just tell them to go fly a kite to “protect the privacy of it’s citizens”. So there is no net gain for a non-US govt.
DATCA would only be reciprocal if ALL USA banks had to identify tax-obligations of ALL it’s customers (US citizens included) in relation to ALL other countries and then remit that information DIRECTLY to the tax authority in each customer’s country-of-tax-obligation. Can you imagine the uproar in the US!?
Reciprocity? No. Hypocrisy? Yep. B#llsh&t? Most definitely.
Richard Rubin. U.S. Imposes Tax Reporting Rule on Nonresident Bank Deposits. Bloomberg (17 Apr 2012)
Check this out. Some EU banks saying that having a Canadian phone number is a form of US indicia because the US and Canada share the same ITU country code.
Thus +1-416-555-1000(Toronto) and +1-212-555-1000(NYC) are both considered US phone number according to the IRS. So are Canadian banks going to have to report on all Canadian with Canadian phone numbers.
FATCA Comment Count Down
And what about people who use Skype phone numbers? Can’t you pick any phone number you want? Wouldn’t that also produce alot of false positives?
Are the people at the IRS not aware that Canada and the US share the same country code?
@tim- I wonder what it would take for Canada to change its country code?
Additionally both the Cayman Islands and Bermuda use the +1 Country Code.