Russian article, published in Russian:
http://www.klerk.ru/law/news/274541/
Anyone with Russian who might provide a good translation? Google translation, with the usual disclaimers, follows. It’s good enough to get the general drift:
According to the letter of the Ministry of Finance of the Russian Federation, Russia has no plans at the international level to harmonize the application in our country the law of the United States, which relates to the mandatory disclosure of payments to the persons subject to taxation in the United States. This May 4 at the conference “Compliance in Russia,” said Director of the Department advising on risk management and compliance at KPMG Dmitry Chistov. From the event: Klerk.ru correspondent Sergei Vasiliev.
It is known that in 2011 the U.S. passed a law which is denoted by the abbreviation FATCA (Foreign Account Tax Compliance Act). Because it will come January 1, 2013 and thereafter will affect the activities of Russian credit organizations, whose operations have anything to do with the United States.
The essence of law lies in the fact that credit institutions in the world should conclude with the IRS (Internal Revenue Service U.S. Treasury Department, an analogue of the Russian Federal Tax Service), a cooperation agreement. In the framework of the bank will be obliged to identify persons among its clients the U.S. (those taxable in the U.S.) and to disclose information about them and their balance sheets in the periodic reporting to the IRS. In addition, the bank will keep 30% of all payments, whose beneficiary is the person the United States, and the source of payment is income associated with the United States, if such payment is directed to a credit institution, have not concluded an agreement with the IRS (or in the customer’s address, which refused to allow the transfer of their data IRS).
If the Russian bank does not enter into such an agreement with the IRS, 30% of its international transfers may be retained by force. FATCA will cover payments made after December 31, 2012.
In February, 2012 IRS has released a detailed explanation of the use of drill-FATCA. In particular, a definition of “wealthy client’s account” in respect of which applies the amplified analysis. Its lower limit is set at one million U.S. dollars. The minimum size of money to be examined the accounts of legal entities, and insurance accounts increased to 250,000 U.S. dollars. By the end of 2015 sends information about the accounts will be limited to owner name, address, taxpayer identification number and account balance. Retention of 30% of non-acceptance will be introduced as from 1 January 2017.
Requirements FATCA, however, contrary to the laws of many countries. Government of the United Kingdom, France, Germany, Italy and Spain announced that the U.S. government signed a bilateral agreement: customer information from financial institutions will be concentrated in a government agency and then centrally, automatically transferred to the United States.
For banks in these countries abolished the requirements of the closing accounts of clients who refuse to support the implementation of FATCA; direct debit transfers from customers who refuse to support the implementation of FATCA; direct debit transfers from financial institutions in the participating countries. In response, the United States undertake to collect and centrally in the relevant countries to send information on the accounts of their citizens in American banks.
Even last year, the Association of Russian Banks asked the Finance Ministry on its official position regarding the application of FATCA Russian credit institutions. Recently, the reply of the Ministry, according to Dmitry Chistov, says that at the international level, Russia’s accession to FATCA is not planned. Thus, Russian banks have set for themselves to decide whether or not to perform the requirements of U.S. law.
I believe there will be no official support from Russia, China, India, or Brazil except along the lines of the existing US Canada information sharing arrangements
It’s be interesting what Brazil has to say considering it’s banking association basically said no, and if the IRS want consideration the IRS would have to pay the expenses incurred by Brazilian banks for such data.
At the end of the day, if the world says “NO” and puts the US in the position they have to pull the 30% withhold tax trigger, I wonder who will blink first? It’s almost the equivalent of the Cuban Missle Crisis financially.
Unless the US enforces the 30% withholding FATCA as Levin sees it is dead.
Good for the Russians!!
I never in life dreamed that I would ever approve of a position taken by the Russians ….. yet now I do ! Congratulations Russia – now do the Russian Banks have the testicular fortitude to just say NO to the FATCA proponents.
@John
The political economy of all this is a quite interesting. One card the US has is it will as January 1st 2013 start collecting information on non resident alien deposits of Russian residents(if it doesn’t get challenged in court by the Florida and Texas Banking Associations). While it might seem hyperbole this really could be “The End” of the post World War Two era. What is fascinating is that you are seeing the traditional European allies of the US trying to find a joint solution the new BRIC countries basically slamming the door in the face of the US and then you the Canada’s and Australia’s that know now they have awfully good deck of cards to play. This reminds me of Jim Flaherty ring leading of anti Global Bank Tax coalition back in 2010 when the US and the same EU5 coalition tried to push one through. I remember Flaherty(Canada’s Finance Minister) flying to down to Buenos Aires to try to get Argentina on board with his anti global bank tax coalition which in the end was Canada, Australia, Russia, China, India, Brazil, Japan, Saudi Arabia, Turkey, South Africa, and Mexico against the US, UK, France, Germany, Spain, and Italy in favor of a global bank tax(sound familiar).
Here are some video clips from that time:
http://www.ctv.ca/CTVNews/TopStories/20100605/g20-financial-reform-100605/
Yeah for Russian!! Way to go!
The translation seems alright. The only quibbles I’d have:
Other articles have even stronger quotes from the Russian government. Deputy Finance Minister Sergey Shatalov was quoted as stating “FATCA violates the principle of sovereign sovereign equality of states” («FATCA нарушает принцип суверенного равенства государств»)
http://www.banki.ru/news/bankpress/?id=3789423
@Michael: the Russian banks were the ones who had been urging the Ministry of Finance to roll over and play dead. They’re probably appalled by this announcement. Most of them will probably comply, or at least try to (many of them probably have poor internal governance and couldn’t gather the required data in the time frame required).
http://isaacbrocksociety.com/2012/04/04/russia-forming-government-task-force-to-look-into-fatca-deal/
as you can see my Russian is not particularly good. I managed to completely screw up the pluralisation of “credit organisations” 🙂
“the enemy of my enemy is my friend” (Arabian proverb)
Without the BRICs FATCA is a farce – swiss cheese but worse. Why should Canada, the EU or others put their banking systems at a global disadvantage vis-a-vis the BRICs for the benefit of the US and Carl Levin. It’s not on. Carl Levin’s terms ends during Jan 2015. Why doesn’t he just step aside and let someone else get on with it.
Also the BRICs know if the US persists with FATCA, it will help weaken the US dollar’s reserve status. If the US loses it’s ability to simply print money to pay for commodities or it’s reduced, it would have to live within its means like other countries. Ouch! the American consumer won’t like that.
What gets me is why does the US Congress want to risk all that for a lousy $8B of extra tax revenue a year – it’s madness.
If the euro, renminbi, rupee, or the real gain reserve status as a global competitor against the US dollar, who would prefer dollars and FATCA along the bull**it reclaiming wrongly withheld money from the IRS?
@John
As I have already made a comparison between citizenship based taxation and Maggie Thatcher poll tax I have to say I appreciated the symbolism of the movie I linked to below. The End of Maggie Thatcher which I sense perhaps is quite relevant to the current postion of the US tax policies.
I really liked the scene at 1:40 where Michael Heseltine says he who wields the dagger never gets to wear the crown and says a few swear words.(Heseltine was always one of my favorite British politicians). The other good one is at 0:33 when Alan Clark finds Thatcher’s parliamentary secretary sleeping at his desk 24 hours before the first leadership ballot between Thatcher and Heseltine.
@ Tim – When I first arrived in the UK, Maggie was PM, and remember the day she resigned. The Poll Tax from the onset was something people voted against by not registering at the local council office as you were legally required to do. The only people who registered were single people (better off) or couples (no better or worse off), however, large families didn’t. The owners perhaps did, but not their children because their bill would’ve rocketed. Then it was left to the council tax “hunt down” these people who didn’t register – sound familiar?
I knew plenty of people who didn’t register.
Now if the UK couldn’t enforce a system where people had to step forward to register, within its own legal system, how on earth does the US think its going to succeed across 200+ countries by using basically blackmail – cough up the data or we’ll withhold 30%.. Carl Levin should sell the stuff he smokes (and keep the money offshore).
I personally will not be filling in FBARs or Form 8938s or 1040s as I do not live in the US. And if they want the passport back, well perhaps that says a lot about the US in general these days in terms of ex-pats – it’s all sour grapes.
@Tim – keep an eye on British politiics from now on the words “No confidence vote” have suddenly appeared with David Cameron’s name because the coalition got a drubbing this week in the local council elections. The Tories and LibDems lost about 40% of their local council seats on Thursday.
http://www.guardian.co.uk/politics/local-elections-2012
@John
I keep hearing rumbles of a leadership challenge by Boris Johnson against Cameron(I would interesting to get Boris Johnson’s opinion on FATCA. I also suppose Boris would have to get back into Parliament). Given there are a lot of aristocratic types in the Conservatives(both Commons but especially Lords) with US Person lineage I wonder how well the “FATCA Agreement” David Gauk and George Osborne signed will play among the 1922 Committee and the backbenchers of the party when they find out its true implications. I am curious as whether or how Lord Russell’s dispute with has been resolved.
@John
This is what the UK government actually says about FATCA in its explanation:
2. FATCA – the Foreign Account Tax Compliant Act, which is part of the US Hiring Incentives to Restore Employment Act of 2010, aims to combat tax evasion by US tax residents using foreign accounts. It includes certain provisions on withholding taxes and on the reporting of information by foreign financial institutions for US tax compliance purposes. These give rise to certain legal difficulties and administrative burdens for financial institutions.
So I ask HM Treasury what is a “US tax resident”
Also if you and look at the intergovernmental statement closely there is no mention of US Person just US Account whatever that means.
There are more US connections over here than people think. Recently there was a UK policitian in the press, the name escapes me, but their mother came from Indiana.
Boris would be great way to hammer the FATCA point home unless he actually has as renounced and it hasn’t appeared on the Federal Register.
It will be interesting if all BRICs opt out. Turning into a pissing contest as to who gets to run the world.
@John
The one interesting implication in the joint statement is account holders in the UK will have the option to be recalcitrant permanently. Does that mean the UK will collect their information some other way from HMRC’s existing data or do British customers really have the right to have the info sent to the US and be withheld.
British customer have the right NOT to have their information sent to the US and instead be withheld.
Russia is rarely anxious to endorse policies formunated by the US. In fact Russia and China both abstained in the UN Security Council vote that condemned Eritrea for its policy of subjecting its Diaspora to a 2% tax on foreign income. I am sure it was not because they favor Eritrea’s tax policies but because they are just relictant to endorce policy positions supported the US.
@ Tim – I don’t have the answer. However, is the UK going to enforce “residence-based” data? In other words if someone is a legal resident of the UK (US citizen or not), the HMRC will not pass data to the IRS, but accounts with US addresses may be passed over.
That’s the scenario that I would believe to be more palatable to all concerned. I can see the headlines in the Sun or Mirror – “The Yanks make the UK pay it taxes”
I’m not sure if any government of the day wants those headlines.
@Northern Shrike , Perhaps you’d be so kind as to revise the above translation, taking into consideration Eric’s suggestions. Cheers.
Tim: I agree with the sentiment that this is the reversal of post-WWII policy. It is the beginning of the end of the global economy. One aspect of the post WWII policy has been the ability of the United States to export it currency to the rest of the world. This is coming to an end as countries are scrambling to find alternatives: See my post, http://righteousinvestor.com/2011/10/24/gold-versus-fiat-currency-in-the-aftermath-of-war/
At this stage, with admittedly limited knowledge, it looks like the Russian Government is going to leave it to their FFIs own devices as to whether or not to be compliant. It is hard to see how at some point they don’t get involved in some manner, after the fallout begins to happen. At that point it is hard to see them just standing passively by as this seems to indicate. Maybe I am reading it wrong.
@JustMe
Its hard to say. I am beginning think this a tip of a much bigger story which is whether American exceptionalism truely is over or not. If read all of the statements countries have made the Netherlands is the only one that has indicated a willingness to sign on to the existing EU5 agreement. Everyone else NZ included has given no indication of there willingness to do so.