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.