I found some rather interesting industry comment letters on the US Department of Treasury FINCEN website related to one of the rulemakings they have outstanding regarding their intent to impose sometype of FATCA recipriciocity on Domestic US Banks. (Note: There idea of recipriciocity is still nothing compared to what they are demanding of foreign banks under FATCA). I find it remarkable the extent to which the US Banking industry is opposed to even these limited new regulations(They aren’t even being asked yet to collect citizenship information from their domestic US customers. I can’t wait to see their response when that is proposed).
I had a fascinating conversation the other day with someone in the homeland who has always defended FATCA to me. How else, he said, can the US catch those tax evaders? So I sent him one of Just Me’s excellent links about DATCA. No answer so I brought it up over the phone. He had read the article but he didn’t really “get it” so I explained. Long silence then “My bank?” Yes. “Here in the US?” Yes. “Oh.” Indeed. 🙂
I found this article:
to be troubling and enlightening. If the real intent of FATCA is to track the US’s citizens abroad, then it is unlikely that any other country would have an interest in DATCA unless it is say, Eritrea.
The real intent of FATCA is to generate income, no matter what the Treasury/U.S. govt. says. Also, there are many countries in the world who would like to know if their citizens have massively large bank accounts in other countries. For example, it appears the UK government is very interested in any capital gains you make on overseas accounts for taxation purposes. So they would love nothing more than to get reciprocity on reporting from the U.S. In fact, there is a general thought that most governments would like to move to GATCA – a Global Accounting Taxation system. I’ve seen a few reports that other countries are considering having their own form of FATCA. So DATCA is going to happen. DATCA has to happen in order for FATCA to work.
@Expat in the UK, Yep, I concur. Here in France there is a strong suspicion that the expats are all a bunch of rich tax dodgers living the good life in places like California (I have to smile every time I hear this because Americans in the homeland seem to have exactly the same impression of their expats). The French gov would love to have info about exactly what these folks are up to and if there is any tax revenue to be farmed. Once they have the info (and they will get it through FATCA/DATCA) they can then make a determination about whether or not it’s worth chasing. I think they will and I can almost guarantee that this will be a very politically popular decision with voters in the Hexagone.
*Thanks Tim. I see you will provide me lots of reading material for my adventure on the other side of the border today. Will print a few DATCA complaints and take with me. Wonder if I will get through/past the border guards going north. I am trying not to exceed the 1.14 liters of gin I am allowed to import for my Canadian friends!
@Victoria, you’re right. Even friends see us as rich people who left the homeland for a higher standard of living abroad. A lot of it is jealousy, and the misunderstanding the economics and society of the other country. I find it sad.
Compared to many Americans, I live a frugal life and only bought stuff I could afford, but the cost of living where I am at is way cheaper than where most of my friends live in France. My 2000 sf home for a family of 4 seems like a mansion to them, and they see my mid size sedan as HUGE!
When it cost less than the small car they could afford in France. Things are bigger in the US 🙂
What they don’t see or don’t want to see is that lower taxes come with lower services. They don’t even believe you when you tell them how expensive healthcare is, and that the quality of the roads here is somewhat substandard compared to the ones in France.
I have a hard time understanding that people in the US would have the same feeling about American expats, mainly because it seems that they would know that the scale of things is different between the 2 countries.
*@victoria, I once had a conversation with an American accountant who lives in Paris and specializes in providing tax assistance to US citizens there in preparing their US tax returns. We were both in Washinngton participating in Washin gton Week, jointlyh s sponsored by ACA and other organizations representing Americans residing abroad.
She told me that she was personally aware that French tax authorities cooperated with the IRS in the collection of US taxes from US citizens residing in France. This seems to be evidence that France does not object to the US concept of citizenship-based taxation.
@zuludgom, I suspect that Mexico would also be interested in data on residents of Mexico who have bank accounts in the US, the earnings from which they have not been reporting or paying Mexican income tax in accordance with Mexican tax laws. I recall hearing several years ago, I forget where, that the Mexican Government had requested that the US Government provide them with information on these accounts but that the information was not provided because it is not available. The facct that the US does not tax the interest earned on bank deposits held by non-resident foreign citizens, which makes the US a foreign tax haven in the eyes of foreign governments who subject such income from foreign sources to their income tax.
So I do suspect that their are governments, other than Eritrea, who would be interested in receiving this information, not because they tax their citizens living abroad but because the income from such funds in the United States is taxable income to residents of those countries.
If the IRS were to collect this information from US banks, which it currenlly does not but would under this new regulation, this would undoubtedly serve as “bait” to persuade foreign governments to allow their banks to comply with FATCA in supplying this information on their accounts held by US persons.
@Expat and Roger,
Just to be clear – I agree with you. I was being a little snarky about Walker’s logic. Still, I found his logic troubling in that it is so specific that FATCA is not about domestic tax cheats and that there is a clear intent to soak the “feller behind the tree” (reference Russell Long).
On a side note, a friend came to me last week seeking resources on how to renounce. She is an accidental American who has never filed and was intending to die a full ostrich. However, her husband was just offered a position in a British bank to do bounty hunting on USPA’s for the reward money. The bank intends to use it’s own information to turn in people to the US whom might owe fines of taxes and collect the rewards. I think a person posted this concern earlier on the site, but I cannot find the reference link.
So, the foreign banks have learned to turn lemons into lemonade. Perhaps the US banks need to be more innovative if and when DATCA is implemented.
oh – one more point… I should have signed off that last post with…
Orwell would never have predicted that FATCA, DATCA and GATCA would finally deliver us into 1984. A world where the state sees everything and everybody sees everybody else as a potential for bounty income. Neighbor reporting neighbor.
Stalin would have loved this…
I believe France along with Canada, Sweden, Netherlands and perhaps a few others(but not the UK) have cross collection provisions incorporated in their tax treaties with the US. However, because the US Senate has refused to allow the IRS under any circumstances(since the late 1940s) to collect a foreign tax judgement on a US citizen living in the US all of the countries who have these provisions have reciprocal opt-outs for their own citizens(In Canada’s case a ruling was made by the Department of Finance lawyers last fall that a dual US Canadian citizen would be considered a Canadian citizen for the purpose of these treaty provisions). I will try to provide some historical references that explain all this. Now the interesting question is whether the government of France like Canada would take the position that it would not collect a US tax judgement on a dual US French citizen.
Wouldn’t FATCA surely give cause to the expansion of black markets, and the development of institutions that can function outside the jurisdiction of the IRS? Those institutions effected by FATCA are not the only game in town, especially when US citizens are being asked to leave them?
@Victoria, I like your story and is often typical. I keep saying that what is happening is incomprehensible to most people so it sometimes takes a lot of effort to drill through misconceptions, but, yes, the sound most often heard after the sound of the penny dropping is…silence.
Admittedly, I can’t read too many of these kinds of letters without my eyes glazing over, but like the ones written to the IRS and Treasury re FATCA, there is a predominant tone to them of almost like parent patiently trying explain to their child why that child should avoid a certain type of behavior that will result in injury to them and other parties. It is obvious that the responses have a lot more thought put into them than what went into the law in the first place. It must be infuriating and frustrating that they weren’t consulted in the first place!
Is there anywhere on earth where you won’t feel like the US is placing you under attack?
@Christophe, Yes, isn’t it strange? I listen to French folks talk about the US and Americans talk about France and 99% of it is pure fantasy. The grass is not greener on the other side of the Atlantic – it’s just different. One thing I’ve noticed though is that we’ve been able to save money here in France in spite of the high cost of living and taxes here. Why? Well, no easy credit for one thing. Except for big ticket items, it’s cash or we do without. We also don’t have to pay extra for private school or healthcare (that’s covered by our taxes).
@Roger, Oh yes, citizenship-based taxation has a lot of fans here and I think it’s definitely in the French expat future now that FATCA/DATCA is a go. Thanks for sharing your experience – doesn’t surprise me that the French tax authorities are cooperating with the Americans.
@Tim, I think it depends on the situation. If we are talking about collecting US taxes on naturalized French citizens or former Green Card holders, I think they would have no hesitation. Accidental Americans, on the other hand, would be harder. If the US tried to claim these people as US citizens, the political fallout would be deadly for the French gov if they did cooperate. Would provoke all kinds of just under the surface feelings about US imperialism and so on. And I can just imagine the headlines in Le Monde and and the righteous anger of the French public.
@victoria, without accidental Americans included, FATCA it is unworkable, discriminatory, and a farce!
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That was probably me: Foreign Financial Institutions could recover some of their costs for implementing FATCA.
Expanded 1099 Laws Repealed:
This is already old news but you may recall the US Congress passed laws in 2010 to significantly expand requirements for businesses to issue annual 1099s to the IRS for purchases from suppliers. These laws resulted in an immediate firestorm of opposition from a broad base which resulted in the laws being repealed the following year by the “Comprehensive 1099 Taxpayer Protection … Act of 2011”.
I would expect that DATCA legislation will encounter similar opposition by US banks and citizens concerned with privacy. Small banks are still held in some regard by the average American, and have had a strong lobby at times, so their support to repeal will be crucial. (They could also fight for exemption). FATCA legislation, on the other hand and as pointed out on IBS numerous times, mostly impacts banks/ financial intermediaries abroad and overseas US citizens, so efforts to repeal will likely fail. My crystal ball sees the FATCA roll-out continuing, albeit with further delays and incomplete initial coverage.
decades the U.S. has served as a safe haven for the ill-gotten finances
of corrupt foreign leaders and their ilk. Former foreign government
ministers, military leaders, and corrupt heads of state have mansions,
businesses, and bank accounts here. The banks who facilitate much of
these activities are required by law to conduct “due diligence” in
determining the source of funds for these “politically exposed persons,”
but compliance is spotty.”……
not generous enough to share with Mexico or Brazil or Venezuela or
Russia when they want to tax their offshore wealth. I mean, Mexico has a
worldwide income tax just like we do. Philippines has that kind of a
worldwide tax. Many developing countries have tried to tax global income
just like we do, because otherwise they end up just having to tax
sales, or their, you know, poor people and middle class has to pay the
cost of government.
But they’ve gotten no cooperation from the
U.S. Treasury in that regard. In fact, when Obama administration came to
power in 2009, one of the first things that happened was that the
secretary of the Ministry of Finance in Mexico wrote to Tim Geithner
requesting that he share some of the same information that he was
sending to Canada on Canadian depositors. He wanted the same information
on Mexicans who had foreign accounts in U.S. banks. And Geithner never
responded to the letter. The reason is it’s a big business for U.S.
banks, as well as for U.K. banks, you know, Swiss banks, to round up
money from developing countries.””
……..”The 1970 Bank Secrecy Act requires banks to report all cash
transactions above $10,000 to regulators and to tell the
government about other suspected money-laundering activity. Big
banks employ hundreds of investigators and spend millions of
dollars on software programs to scour accounts.
No big U.S. bank — Wells Fargo included — has ever been
indicted for violating the Bank Secrecy Act or any other federal
law. Instead, the Justice Department settles criminal charges by
using deferred-prosecution agreements, in which a bank pays a
fine and promises not to break the law again.
‘No Capacity to Regulate’
Large banks are protected from indictments by a variant of
the too-big-to-fail theory.
Indicting a big bank could trigger a mad dash by investors
to dump shares and cause panic in financial markets, says Jack
Blum, a U.S. Senate investigator for 14 years and a consultant
to international banks and brokerage firms on money laundering.
The theory is like a get-out-of-jail-free card for big
banks, Blum says.”……
Jatras analysis here…
A cross reference: DATCA is not Dead
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