In non-Anglophone countries, a lot of the coverage of FATCA is driven by cross-border tax consulting firms — the only organisations with the resources to translate huge volumes of FATCA news into the local language, and the connections to push their version of the story to local journalists on a regular basis. These companies, despite their crocodile tears, are very happy about all the new business that FATCA is going to generate for them in helping customers navigate complex new requirements, and get no benefit by promoting opposition to it.
In Anglophone countries, however, the local journalists have no excuse for not getting their FATCA coverage right anymore; there is a huge amount of material out there about the potential negative effects of the U.S.’ new fiscal imperialism. So it’s interesting to see the sharply differing coverage of FATCA in Ireland — a country with a high presence of cross-border tax sandwich-makers — and Jamaica, where such companies are far less active.
In the Jamaica Observer, business editor Paul Rodgers clearly understands the reality of FATCA — he describes the situation as “Between a dog and a hydrant”:
More than a third (37 per cent) of the customers Johnson Survey Research questioned last month for an unnamed Jamaican institution said they would “probably” move their money rather than give in to the US Foreign Account Tax Compliance Act (Fatca) …
The strong feelings against compliance transcend individual personal interests and appear to be part of what many feel should be the rights of small, independent countries like Jamaica against uncalled for, unjustified and obtrusive demands by behemoths like the United States,” said the research company. …
By a seven to one majority, the customers surveyed rejected the idea that the US had the right to demand the information. Even after learning that the institution could face penalties amounting to 30 per cent of its US profits, 61 per cent of those surveyed called for defiance. The new law has no benefits for Jamaica other than allowing local financial institutions to continue doing business in the US. This will be offset by the high cost of compliance.
Aside from the simple reason that Jamaica is an independent country with a sense of national pride, there are more utilitarian reasons why FATCA does them little good. First, though Jamaica imposes tax on its residents’ worldwide income, there is no tax on dividends or capital gains (correction: okay, it’s actually more complicated than that, as a commenter points out). Tax Administration Jamaica gets little value in learning about residents’ foreign brokerage accounts, or bank accounts that have been used to fund foreign real estate purchases, which is where most of Jamaica’s offshore funds are likely to be. Jamaica does tax interest income from foreign debt or bank accounts (I believe the logic being that it would be tax-deductible in the hands of a domestic payor), but given U.S. monetary policy right now, the amount of interest income accruing to Jamaican depositholders is likely quite meagre.
For those who missed it, bubblebustin posted last week about another Jamaica Observer FATCA article, “The high cost of FATCA”, in which a Jamaican National Building Society Executive made an interesting point:
The JNBS boss added that Fatca could have a significant impact on the wider economy in the form of flight of capital to countries where there are no requirements for compliance, or in a proliferation of illegal and unregistered financial providers.
This is not just a problem for the rich, either. Middle income countries which have made significant progress in moving their people away from the informal sector and in particular from “informal lenders” could see these gains reversed by any initiative which raises the cost of banking services. And FATCA most certainly raises the cost of banking services. One UK estimate says US$70 per account. Who is going to bear the extra $70 for a working-class saver whose tiny account is already barely worth the bank’s trouble to administer?
For the most part, the newspapers’ audiences also appear quite angry about FATCA, though as in Canada there is minority of commenters who are jealous and resentful of their neighbours’ green cards and see the FATCA situation as a well-deserved comeuppance.
Over in Ireland, in sharp contrast to Jamaica, the journalists aren’t thinking very hard, just parroting what the “experts” tell them. Ken Owens of the Irish Funds Industry Association is showing up in various media, supporting Ireland’s surrender to the IRS in pursuit of alleged “reciprocity” under a country-to-country agreement. Mr. Owens, incidentally, does not appear to be a fund manager himself at the moment. Aside from his position as IFIA chair, his day job is at PricewaterhouseCoopers; specifically, he’s an audit services partner — in a company which stands to see significant gains in business thanks to FATCA.
I can hardly blame Owens for talking his own book, but it would be nice if journalists would tell us that he is doing so. The Independent, at least, tells us about Owens’ day job. “US tax talks could boost financial firms here”:
The Irish Funds Industry Association (IFIA) believes the start of the talks with the US revenue authorities represents a significant breakthrough for Irish financial institutions which, it says, have little to hide relative to some of their foreign-based competitors based in more secretive banking regimes.
Ken Owens, of PricewaterhouseCoopers (PwC) and chairman of the IFIA, added: “By permitting Irish foreign financial institutions to deal with the Revenue Commissioners here, rather than the US-based IRS, they will be saving a significant amount in costs.
HFM Weekly, in contrast, doesn’t mention Owens’ day job. Presumably they know about it, but don’t think it’s important to let the readers. “Ireland joins EU Fatca talks”:
Ireland’s decision to join the debate further enhances the sense of global cooperation. An agreement is expected by the end of June 2012. “This is welcome news for an industry which operates on a multi-jurisdictional basis,” said Ken Owens, chairperson of the Irish Funds Industry Association
“The fact [sic] intergovernmental arrangements are likely to be based on a model agreement means that any framework under which bi-lateral exchange of information agreements operate should be done on a consistent basis, rather than under individual agreements, which might operate on a disjointed basis.”
Of course, as the propagandists fail to mention, the U.S. idea of inter-governmental reciprocity is “you can tax your residents, and we can tax your residents too, but you don’t get to tax our residents”, and the domestic objections to FATCA arise not from bank secrecy laws but data privacy protection laws. Jamaican journalists understand this aspect of FATCA (Paul Rodgers, for example reminds us that “The IRS claims the right to tax Americans on earnings made in other countries even if they have paid their local taxes”), whereas Irish journalists make no mention of it. Shameful.
What is worse about the Irish situation, HFM Weekly, the publication announcing Ireland’s decision to join FATCA talks, won’t publish negative comments about FATCA on its blog.
I entered some negative FATCA comments the other day and have yet to wait for them to appear – are they straggling free speech now? The comments were polite but not in favour of FATCA.
“you can tax your residents, and we can tax your residents too, but you don’t get to tax our residents”
“The IRS claims the right to tax Americans on earnings made in other countries even if they have paid their local taxes”
^^^This is starting to make the lawmakers in these “FATCA-partner” countries look like clowns. Seriously, how far will they bend over for the US?
That’s quite interesting about Jamaica. The taxes are a killer in Brazil. As I tell everyone, if I start to make a lot of money, I’m moving somewhere with lower taxes (BUT NO DESIRE TO GO BACK THE USA!!). Yeah.. I would love to be the steretypical FAT CAT that lives on the beach sipping wine 🙂
Could the biggest difference between Jamaica and Ireland be the fact that Jamaica is apparently a large exporter of illegal drugs to the US? I’m sure that many Jamaican diaspora don’t want to have to explain the source of funds for those Jamaican bank deposits. For those, it’s probably much less risky to do business with the informal sector than with banks that are beholden to the US. After all, covertness is a requirement for those who deal drugs.
sorry about the phrasing “the fact that Jamaica is apparently” reeks of “truthiness” 😉 however, how does one confirm the amount of drug business between Jamaica and the US?
@All, Found this post: http://www.intltaxcounselors.com/blog/?p=11563
Not entirely sure what it refers to:”IRS makes Canada its BFF & tells 78 other countries to bug off.”
Published by Brian Dooley
April 20, 2012
There is a list of countries (Jamaica is one), but no further comments.
Brian Dooley cracks me up. Only problem is I can never tell if he intends to. Whenever I read his posts I sit there for five minutes wondering if I need to get a tune-up for my sarcasm meter. E.g. “The IRS is the world’s greatest tax agency”.
Here’s the proposed regulations he’s talking about:
And here’s the list of countries which have tax treaties with the US (who are presumably going to be subject to a review of their policies and practices before the IRS sends them any information). Brian Dooley’s post has the same list, but I guess he’s also separately including the overseas territories to which treaties also apply (e.g. Aruba, which is part of the Netherlands).
Thanks @Eric. The actual intent of the Dooley entries are hard for me to fathom.
Maybe Brian Dooley is the Stephen Colbert of investigative journalism?
Factual error in the article. Jamaica DOES tax foreign dividends (ie dividends from non Jamaican companies) and does tax TRADING gains though not Capital Gains on long term investments (save, within Jamaica there is a Transfer Tax which purports to tax alleged gains on sales of real estate and of shares in PRIVATE companies).
IRS seems to be breaching its own Double Taxation Treaty by threatening to tax Jamaican Banks at 30% on dividends and portfolio investments ex the US. Simple answer give two fingers to the IRS and stop investing in US portfolio stocks.
Very interesting that this seeks to evade Government to Government negotiations such have been the practice in international dealings but instead are an attempt to enforce IRS rulings extra territorially.
The US is already losing international business – both from goods that used to be transshipped through ports such as Miami and from folks traveling to the US to buy stuff for their businesses PLUS are losing out on tourist business and in due course will lose out on Health Care tourism. Such a shame that one of my favorite countries is shooting itself in the foot.
Most Europeans do not understand how the US could double tax like it does. Many Europeans think I am crazy when I tell them about it. That makes it even harder. We need to spread the word.
Another update from Jamaica:
Edmond Campbell – Thursday April 26, 2012
‘Act Now on US Tax Law’
“THE HEAD of one major financial institution in Jamaica is urging the government delegation now meeting with International Monetary Fund (IMF) officials in Washington to use the opportunity to engage members of the Barack Obama administration in discussion on the controversial Foreign Account Tax Compliance Act (FATCA), and how it will impact local financial institutions.
Finance and Planning Minister Dr Peter Phillips and senior technocrats, including Financial Secretary Dr Wesley Hughes and Bank of Jamaica Governor Brian Wynter are holding talks with a team from the IMF in the United States.”………..
Steven Jackson, Gleaner Writer
“Jamaicans who frequent the United States (US) – including merchants, athletes, pilots and entertainers – should soon expect to see their income and savings above US$50,000 disclosed to that government under a measure to catch tax dodgers called the Foreign Account Tax Compliance Act (FATCA).”
– Livern Barrett
Thurs. April 26, 2012
‘US tax compliance law causes jitters among local bank customers’
“Amid fears that a new United States (US) tax law could deal a severe blow to several Jamaican financial institutions, one senior industry executive has suggested that the legislation could be a blessing in disguise.
General manager of Jamaica National Building Society (JNBS), Earl Jarrett, presented the optimistic view yesterday, even as he pointed to the findings of a survey which showed that a significant percentage of local depositors, incensed by some of the stipulations in the Foreign Account Tax Compliance Act (FATCA) being implemented by the US government, are prepared to close their accounts.
The survey, which was conducted by Johnson Survey Research Limited last month, showed that more than a third of the respondents indicated that they would “probably” close their accounts at any local financial institution that passed their information to US authorities as is stipulated by FATCA.
In addition, it also revealed that 40 per cent of respondents expressed the view that Jamaican financial institutions should not hand over their information, even in the face of the stiff penalties that could be imposed for non-compliance.”…….
…………””You could find somebody establishing a financial firm that could say that it will be FATCA-proof and, as long as it just does domestic business, it could well do that,” he reasoned.
Jarrett said more depositors could also decide to hold on to their cash or enter into more “partner” arrangements.
He added: “We have here in Jamaica a very successful system of community-based savings.”