Good comments:
Violation of NZ Human Rights Law
Violation of NZ Privacy Law
No Ability under NZ law to withold tax
Cannot comply with FATCA under NZ law
Suggest “Intergovernmental Agreement” (I am getting tired of this)
http://bsmlegal.com/PDFs/NZBA.pdf
There is an insert in the middle from the Australian Bankers Association
Thanks Tim…
I hadn’t yet had the time to read the Australian submission. Yes, they all seem to be ready to sign up for GGGATCA as the Government to Government Global Account Tax Compliance Act. 🙂
Good job again Tim. Note that the New Zealand comments strike the same note Sweden did. These countries ARE NOT saying they are against the FATCA idea of sharing banking data bases with the United States, both are saying they want a deal like the Big Five got which was announced on February 8, the day the FATCA regs were published: make the banks turn over the names of their suspected American depositors to their respective governments who will in turn, turn them over to the IRS. It is almost as if the government said to their trading partners world wide with the enactment of FATCA, “gives us the names of your suspected American customers or we will force your banks to be our own withholding agents.” Works for the Europeans. As long as they get the dope on their citizens abroad, they will gladly give up their Americans.
Just one slight correction…
“As long as they get the dope on their ‘residents deposits in America’, they will gladly give up their Americans.”
They don’t really care about their Citizens abroad. My wife is Australian, and Australia cares not one whit about her deposits, interests or accounts in America, as she is no longer resident in Australia.
What she has in the US, is of no concern to them.
But they do care about her brother’s deposits in America as he is still living in Sydney and resident there. That is where I am right now. Ironically we have just been discussing this very issue just a couple minutes ago. 🙂
BTW…. ran into an Australian at breakfast this morning whose wife is American, and hasn’t filed a US return or FBAR in 30 years. Says he won’t tell her, so as not to upset her that she is non compliant. He also said, that he sometimes thinks he would like to live in America, as that is where is brother is, in West Seattle, BUT…. on second thought the tax consequences of becoming a US person, and the the cost of medical insurance has put him off. Likes visiting though! 🙂
Foreign Account Tax Wringer Act ?
@All, It doesn’t look so good, American’s are leaving one by one.
Six million Americans abroad are discovering they have a CANCER called “citizenship-based taxation.”
FATCA is just one of the symptoms.
1,788 just had the CANCER surgically removed.
@Ben Franklin… Good one. Think I will try to squeeze that down to 140 characters and tweet it…
6,000,000 US #Expats have a CANCER called “citizenship taxation.” #FATCA is one of the symptoms.1,788 just had surgery! http://reut.rs/IGJ3Dx
— Repost; first attempt appeared to fail —
@ S Mopsick
“These countries ARE NOT saying they are against the FATCA idea of sharing banking data bases with the United States, both are saying they want a deal like the Big Five”
I disagree. The Bankers Association is not saying that at all. They are saying that FATCA would be illegal in NZ and so it is dead on arrival and that the IRS is sh#t out of luck if that’s what they want to do. They are saying that if the IRS wants to get anything done it will have to be a govt-to-govt transfer agreement of the data. The NZBA does not “want” a govt-to-govt agreement; they are simply saying it is the only option that the IRS has to pursue.
“As long as they get the dope on their citizens abroad, they will gladly give up their Americans.”
Nope. As Just Me pointed out, they care about their **tax residents’** deposits in other countries. But it is not that simple. Assuming information on US persons is collected by NZ banks and handed to the NZ govt for possible govt-to-govt transfer, then the IRS’s troubles really begin. Here’s why:
1) The NZ government will only act in a reciprocal manner. If the US govt is going to make US banks identify to NZ tax residency status (there are some tricky rules for this) and automatically transfer their account information to the NZ govt then this will work just fine. But the US govt has made no moves towards this. They’ve made half-hearted gestures such as the recent “DATCA” regulations, but these are not even close to being reciprocal measures (for reasons I’ve described in another post). When the day arrives that the US govt will automatically report (to the NZ govt) the accounts and income of a US Citizen that spent more than 183 days in NZ during a tax year, that’s when reciprocity will be sufficient. Not before then.
2) The information transmitted to the US govt will be used against NZ citizens in the USA (and US Persons living in NZ) in a discriminatory and disproportionately punitive way. There is no such thing as an FBAR here, no life-altering civil penalties for having a foreign bank account, and certainly no criminal liability attached to having one either. If you have unreported income from a foreign account then you just have to pay the tax owing, accuracy related penalties and interest. NZers perpetually travel and live around the world; giving the US govt the information to destroy a NZ citizen, who is temporarily living in the US, for a paperwork error (as the US govt is so keen on doing) is not something that the NZ electorate will allow. And I will personally and vigorously be letting my various parliamentary representatives know what FBARs are, my particular story and how the NZ govt would be facilitating the same shakedown for other NZers if they start transferring such data.
The upshot is that the govt-to-govt transfer option (the only option) will result in what currently exists; a bilateral tax treaty where only individual requests for information are handled. It’s a bit like trade agreements; the US govt is all for them until they are confronted with the necessity to dismantle their tariffs, subsidies and protectionist policies. And then everything grinds to a halt.
@All
I think the one thing people don’t understand is in most countries banks ALREADY report everything on the non resident customers to the local tax authority. The exception are the US(soon to change), Switzerland, hardcore “tax havens” etc. For example in Canada they send form NR4 on their non resident customers to the Canada Revenue Agency for years. They don’t have any problem with doing this and have been doing it for years. As such CRA right now has not just NR4’s for this year but has ones going back eight years in their files on every non resident Canadian banking customer anywhere in the world. So right now Canada has about 90 tax treaties and TIEA where CRA is authorized to engage information sharing and some lesser number where at the moment full automatic sharing of information is taking place. For example a typical case of how automatic information sharing works is with lets say a Canadian living in the US with an RRSP back in Canada. When they make an actual distribution out of their account the Canadian bank sends a form to CRA in Ottawa who then turns around when seeing it has a US Address and send it Washington DC automatically.
A couple of unconfirmed points that you shouldn’t bet your life on:
1. I don’t believe the existing information sharing arrangement between Canada and the US has ever been used for Title 31 FBAR purposes. In fact there is a language in the treaty that I suspect says it can only be used to forfill Title 26 tax purposes.
2. I don’t believe when the “automatic” information sharing between the CRA and IRS started back in 1995 there were people in either side of the border who caught with undeclared accounts on the either side that went to jail for it or anything like that. What did happen is both CRA and IRS fed all the data into a big computer and matched it to what people were actually declaring and when there was a discreprency “dinged” them.
3. While the information sharing program began in 1995 the CRA gave the IRS all the “back” data going back to 1988.
4. The actual mechanics of what happended were. If you were lets say a US resident with “undeclared” Canadian source income. You recieved an automated letter from the IRS saying Revenue Canada has informed us you earned xyz in Canadian source income this isn’t on your return please pay IRS abc amount you have 60 days to appeal this ruling.
@Moby
I will try to find it on the NZ Inland Revenue website but I almost certain that NZ Banks file a witholding form with NZ Inland Revenue on their NZ non resident customers. I know for a fact there is full automatic exchange of tax information between Australia and New Zealand and their has there has been for years. So systems are in place for non residents. Remember you Kiwi’s have a really sophisticated tax collection. system where you don’t even have to file a return no matter how much money you earn as long as it is from “traditional” domestic Kiwi sources. NZ Inland Revenue I am sure is already collecting quite a bit of information on non resident payees.
And if you don’t believe a Global Tax Data Exchange regime (GATCA) is in the making, read this on Ireland. http://bit.ly/JcaSmO
and Private Equity Firms Urge Flexibility in FATCA
http://bit.ly/KvvN3f
Everyone wants more flexibility, or as New Zealand and Ireland seem to want, something like the 5 nation EU pact deal or a Global tax data exchange. Now, will the IRS listen? I do believe this is what they wanted anyway. Public hearings are May 15th, and we shall see.
Just a reference back to the NZ stuff story about the NZBA..
http://bit.ly/J5jj1C
@Just Me, re the ‘flexibility’ and those inter-governmental exchanges, and what the IRS wants.
I think it is like the story about a frog (and also how to cook lobsters?) where the water in the cooking pot is just lukewarm, and so the frog stays in and just swims around. Then the cook gradually turns up the heat – but the frog doesn’t notice the incremental changes, and continues swimming – until it is too late to jump out – and voila! It is has been cooked.
Tim
If you are non resident in NZ, and have an account with an NZ bank, there is a small Non Resident withholding tax that is reported to the IRD. Might that be what you are thinking about?
In my years of having an accounts in NZ banks both resident and non resident, I am not aware of any withholding form that has been completed, but certainly aware that tax is withheld when interest is assigned to the account.
The NZ bank produces a Tax certificate document at the end of the fiscal year showing what interest was paid, and what tax has already been deducted. The IRD already has your money, and your tax obligation has been met. For many, unless for some reason it was too much withheld, there really is no need to file a return, if that is all you have for income.
Also, you are right about sophistication, as this story from September says, they really say they have no need for FATCA like rules
http://bit.ly/nOJsoh
and then, when you begin to have hope that maybe the US isn’t going to get its way, there is this sobering reminder of the mindset by many…..
@Moby and @Just Me:
You both have obviously given this a lot more thought than I have but I am focusing on the section of the NZ statement under “Partnership Agreement” para. 9 which refers favorably to the February 8 announcenent by the Big Five European governments. That paragraph the NZBA “welcomes…[that] approach to ..FATCA implementation…and the opportunity…for a similar approach..” with regard to New Zealand. That paragraph also talks about the “need to overcome legal impediments to compliance such as those we have outlined above in relation to New Zealand domestic laws.”
I could be wrong, but it doesnt look like NZ or Australia are looking for a way out of the information sharing idea of FATCA. Why would they? The Australian and New Zealand banking industry does not want to be excluded from American banking markets any more than England, France, Germany, and Spain do. They want a piece of the action like every other industry in the world where the profit motive drives everything.
Also remember that the “brilliance” of FATCA or the “evil” of it (depending on your point of view) is that the US is holding all the cards. FATCA says in essence to the whole world (and please don’t kill the messenger here) “we don’t care what your domestic laws say, if you want to play ball on our field you have to submit to the 30% hair cut if you refuse to become a withholding agent for the US government. You want more time, we’ll probably give you more time but either we get the names of your American customers from your banks or your friendly government but we are going to get the names.”
Again, I could be wrong but I do not see any movement at all on the world scene by modern, industrialized, computerized, capitalist nations to avoid the essence of FATCA which is to produce a world-wide data base of people who bank internationally. It is well documented that the world’s major international banking institutions are comitting billions of dollars to use the implementation of FATCA as a reason to completely revamp their internal computer systems to get on board before they miss the train.
@ Steve: “a piece of the action” LOL. A piece of of a debauched dollar and sinking economy. You are working on assumptions that don’t work anymore. Consider that China has a current monopoly on rare earths. I have an idea. Let’s let China dictate the terms of the world economy now. Or India, they are beginning to own most of the world’s gold. The US is becoming irrelevant. And it is analogous to the Pope: he was declared infallible only after he’d lost dominant political power over Europe. FATCA is a sign of US waning power and influence, not of its ability to tell the world what to do.
@Steven…
I do agree a global exchange of data is coming. Banks can put up with a lot of stupid regulations, but they would like uniformity and not one countries unilateral FATCA actions.
Exactly what form GATCA it will end up being, and will US Citizenship taxation make it convoluted? Well only time will tell. Maybe this realization of the added complexity of the US taxation model will force changes to a territorial system back in the US. Maybe not. I really don’t know. There is a lot of moving pieces and cross currents to this entire thing, and will be something we will be looking back on 20 years from now, and scratching our heads asking “how did this happen?”
Right now I will be interested if anything of importance or significance comes out of the May 15th public hearings. Sadly, you will not hear about it on Brian Williams NBC 22 minutes of World News nightly! 🙂
and I got a chuckle out of your “(and please don’t kill the messenger here)” Point taken!
@Petros
Unfortunately, as long as the U.S. continues to have the worlds largest military scattered around the world, continues to spend more on so called “defense” than the rest of the world combined, and continues to expand its drone wars everywhere, it will not be irrelevant. Actually it could become more relevantly dangerous, is my fear.
http://bit.ly/ISSeTh
@Just Me: The regulations hearing process at the IRS generally accomplishes two things. It gives the IRS an understanding of any technical problems which were unanticipated by the drafters of the Regulations once the industry effected by the Regs. has a chance to take a look. But more importantly, it serves as a weather vane for the IRS to determine the depth of the reaction from the public in terms of the volume of comments and the number of people who request to speak, even though the comments may not result in an immediate change once the regulations are adopted in final form as opposed to “proposed” or “temporary” status.
Mr. Joe Green from Democrats Abroad is scheduled to speak and he will report to the IRS that in a recently anounced survey concerning banking issues for American expats on their website, 1500 people responded within a few hours and there are over 300 “stories” to be told which are now being edited for publication on the Democrats Abroad web site.
American expats living around the world are finding their voices through Democrats Abroad, the Isaac Brock Society and American Citizens Abroad and their is a rising crescendo that is articulating the injustice of citizenship-based taxation at least as it applies to the expatriate community.
All Isaac Brock Society readers should go to the Democrats Abroad website and take the survey. This is one opportunity to speak to the government which will definitely be heard if not immediately acted upon.
@Steven. I definitely took the survey, emailed Joe Green (no response) and posted my story on their web site. From the looks of the post about the Dems Abroad effort, http://bit.ly/IGbzXq a lot of Isaac Brockers did so too, so that is good.
However, as you know, when it comes to general public awareness, there is essentially none in the MSM, so not sure how they will gauge the wider public interest, which is focused on jobs at home, how to avoid foreclosure and have never heard of FATCA, or if they have think it must be about FAT CATs.
Still, I am glad there is this public meeting, and will watch with interest. I have to assume, but should check, that C-span will cover it.
@JustMe
My guess is while when you had a non resident NZ Bank account you may have never actually filed out a witholding form yourself your NZ bank had all of your information(proof of where you lived and who your were) on file as matter of NZ KYC/AML law and thus had all the informationa to submit the witholding form to NZ Inland Revenue on your behalf. If you were a Australian resident at the time ATO(Australian Tax Office) definately would have the received the information from NZ Inland Revenue. (The one exception may have been if the interest amount was really low like 50$ or something like that no tax agency cares about).
In terms of FATCA. I think in terms of FATCA the US goes hot and cold on whether it wants an intergovernmental agreement. For a long time it was telling countries like Australia that all its financial institutions had to report directly to Washington. Since last fall I think in private it has been backing down on that stance.
Canada is the one exception to the genius of FATCA. True, the US could cut Canada off from the US Financial System but in doing so because of interconnectedness of the two countries would damage itself quite badly and probably bring down the banking systems of both countries. Thus the as much as might pain certain believers in American exceptionalism in Washington they actually really do need a FATCA deal with Canada of some sort. (They also need to stop the renounciations from growing in Canada too). The other neat problem the US has is the Canada Revenue Agency appears to be on the early stages of creating its own CATCA system(I am planning a future post on CATCA as I find out more) whose burdens will fall heavily of US banks who invest in Canada and because of sucky nature of the US economy right now a lot of US residents and US banks really want to invest in Canada. Where it gets really interesting is Canada appears to already have struck a CATCA intergovernmental agreement with none other than Switzerland while US financial institutions are left in the cold. Unfortionately CRA has already had to postpone the implementation of this “CATCA” system because the US doesn’t like the taste of its own medicine. One interesting angle is whether US banks will demand the US enter into a CATCA intergovernmental agreement and whether that gives Canada some more cards on FATCA.
More on “CATCA”
http://www.ey.com/Publication/vwLUAssets/Tax_Alert_2011_No_24/$FILE/TaxAlert2011No24.pdf
Just Me wrote:
So the US will move from republic to empire. Sounds like Star Wars or the Roman Empire. Seriously, though, it is because of its waning influence on the economic front that the United States will move towards brutal militarism. We should all fear that that could happen, or is happening actually.
@ Just Me, Also, my response to Steve is that it is taken for granted that everyone wants to invest in the United States, that they want and need access to our markets. Well, it’s like saying Constantinople will always buy Chinese silk through Persian dealers. The United States is waning, and the dollar as the world reserve currency cannot survive another term of Obama. It won’t survive Romney either. Already, the world is making arrangements to circumvent the United States. One must never assume that investors will want US investments, no matter how costly and odious the United States becomes. Doctrines of investing, like “diversification” are all under scrutiny because of the volatility and insecurity that bad US fiscal policy has created in the system. I for one do not think the world will tolerate this crap much longer. And then the US dollar will suddenly plunge and the world will stop using the United States as the economic hub. It is sheer arrogance on the part of United States to think that they can insist upon all manner of odious regulations that violate all previous trading relationships and agreements, just so as to have continued access to the US market.
@Petros
The role of the dollar I have always thought is a little weird. In Canada for example very little is priced in US Dollars despite our proximity to the US. Even things like oil and jet fuel are priced in CAD(and metric units too). Our oil industry is probably one of the last places on earth using old style 1950s posted prices and using metric units. Our payments system(Interac)is also fairly independent of the US Visa Mastercard duopoly.
http://www.imperialoil.ca/Canada-English/Files/investors_Refsup/cruprices.pdf
Where you really find the US Dollar is still king is a lot of developing world. The Carribean, Panama, South America lots of Asia still. There other competitors like the Euro and the Yuan but they still have there flaws. Then you have countries like Canada that have pretty solid currencies while aren’t used outside the country are used for almost all transactions inside. As I pointed out earlier the US really does need a FATCA deal with Canada as much as Canada’s needs one. Given the huge trading relationship to cut off Canada under FATCA would hurt the US almost as badly especially with Canada developing its “CATCA” quasi retalitation. If there are to big issues to watch between Canada and the US one is whether the US allows Canada into the TPP without onerous conditions and second is a FATCA “deal” and sometype of resolution to everything we discuss here.