I don’t know if anyone has posted the link to this news article from June 21st already.
FATCA ‘failure’ will cost the US
“The real liability of FATCA, legislatively or politically, is not what it costs you as US expats or foreign institutions, it is what it costs domestic US institutions to collect information for the foreign ‘partners’.” Some estimates have projected compliance costs of $7.5bn just for the top 30 banks.
Yes, I posted it on the FACTA thread:
Oops sorry. It’s hard to keep up with this board. I’ve been on a mini no FATCA vacation lately.
@omg, yes I’ve noticed your absence. I’m glad to see you’ve come back to post this thread. Thanks, this article needed its own thread.
Why should the government care what FATCA compliance costs the private banking industry? It’s not their money. So the industry should lobby against it right? Probably not, because FATCA is really a form of protection for American financial institutions. Think of it as a tarif by another name, because tarif is a really strong word. For both American Banks and for the U.S. Government, it’s really a win-win proposition. The losers are expats, foreign banks who would like to do business in America, etc. Of course a foreign bank could always merge and become a U.S. bank, and just maybe that is what FATCA is really all about.
The government should care what FATCA compliance costs US banks because those costs are tax deductible meaning less money for the US government. If compliance costs 7.5B to US banks alone how many billions does the US Treasury lose in taxes which no longer have to be paid because US banks have higher expenses? More than it will gain on an annual basis, alot more.
When a business spends more on a product than it can sell it for, that’s called a really bad idea. The same applies to government but it seems the US government is too stupid to do the simple math.
If American banks are forced into spending all this extra money, they will pass the costs onto US consumers, the bank sure as hell isn’t going to eat the cost. US banks already charge ridiculous fees, I can’t imagine what kind of fees they would have to come up with to pay for the 7.5B in compliance costs.
Could expats argue that if their names are turned in, they risk cruel and unusual punishment by the US for sometimes minor compliance, and that either the banks or foreign government should not turn in their names, or only with some guarantee that their wealth is not going to be taken away.
Most foreign government won’t deport criminals to countries that have death penalty. We could argue that this is a similar case.
Christophe, at least the Canadian government has already acknowledged that what the US wants to do amounts to cruel and unusual punishment. The problem is not that our government doesn’t care, the problem is that we are dealing with a beast called the US government which uses threats against our banks the same way they threaten sanctions against bad actors like Iran. They treat their friends almost as badly as they treat their enemies.
Just think about how the US treats it’s own people. There are 900,000 returning soldiers who have an average of 11 disabilities and they are made to wait more than 6 months just to have their cases heard. While they wait, they are not collecting disability benefits. On top of the physical and emotional anguish of returning from a war zone, they have to worry about how they’re going to eat and keep a roof over their heads. Even the ones that are physically able can’t find jobs because the US economy is just awful.
While their people are suffering, the US government keeps coming up with more and more expensive regulations that make businesses want to leave the country altogether. The way the US government is functioning right now can only be described as insane. They are creating misery everywhere, at home and abroad.
“FATCA Fallout” sanctions by foreign bank against long term dual nationals like Amy Webster are not just cautious “self defense”. They are warning messages. They are retaliatory sanctions. And they are prelude.
Hopefully, the US government will understand the message.
Here’s an interesting way foreign banks could fight back against the US government by harming US businesses. The idea is not farfetched because some US banks are already doing this to foreign businesses.
In the last few years many US banks have started charging a 3% international transaction fee to the card holder if there is any hint a foreign vendor may be involved in the transaction even if the transaction is billed in U.S. dollars so there is no reason to charge a foreign currency exchange fee. The US banks are doing this because they’re hurting for money and will do anything they can get away with. This action harms foreign businesses.
Thanks to the Internet this war can be fought both ways. What if all foreign banks started charging their customers a 3 to 5% international transaction fee where they suspect a US business is involved in the transaction even if the US vendor bills in the card holder’s native currency (many online vendors are now able to bill in pretty well any currency allowing them to bypass the issuing bank).
Since the US is big in online commerce, this strategy could deal a real blow to US businesses. International consumers may be less inclined to buy from US companies if they know they’re going to pay an additional cost.
@Christophe, I believe that FBAR penalties are unconstitutional because they are excessive fines (not exactly cruel and unusual punishment but it’s in the same 8th amendment). The Supreme Court already ruled in 1998 that the penalties for failure to file the CMIR (Report of International Transportation of Currency or Monetary Instruments) are unconstitutional because they are “grossly disproportional to the gravity of the offense”. The CMIR has to be filed by anyone traveling to or from the US carrying more than $10,000, and it is part of the same law, the Bank Secrecy Act, that created the FBAR.
I really like this paragraph of the decision (my emphasis at the end):
Under this standard, the forfeiture of respondent’s entire $357,144 would violate the Excessive Fines Clause.
Respondent’s crime was solely a reporting offense. It was permissible
to transport the currency out of the country so long as he reported it.
Section 982(a)(1) orders currency to be forfeited for a “willful”
violation of the reporting requirement. Thus, the essence of
respondent’s crime is a willful failure to report the removal of
currency from the United States.
Furthermore, as the District Court found, respondent’s violation was
unrelated to any other illegal activities. The money was the proceeds
of legal activity and was to be used to repay a lawful debt. Whatever
his other vices, respondent does not fit into the class of persons for
whom the statute was principally designed: He is not a money launderer, a
drug trafficker, or a tax evader.
@Shadow Raider, thanks for the links. This case is interesting. I knew we had to declare it when you ENTER the US, as it is on the customs form. However, how was the guy supposed to know that you have to declare it when you LEAVE the us, as mentioned in wikipedia. You only go through customs when you enter the country of destination. I wonder how he got caught.
@Christophe, The money was mostly in his checked baggage, and was found during baggage inspection. From the court decision:
On June 9, 1994, respondent, his wife, and his two daughters were
waiting at Los Angeles International Airport to board a flight to Italy;
their final destination was Cyprus. Using dogs trained to detect
currency by its smell, customs inspectors discovered some $230,000 in
cash in the Bajakajians’ checked baggage. A customs inspector
approached respondent and his wife and told them that they were required
to report all money in excess of $10,000 in their possession or in
their baggage. Respondent said that he had $8,000 and that his wife had
another $7,000, but that the family had no additional currency to
declare. A search of their carry-on bags, purse, and wallet revealed
more cash; in all, customs inspectors found $357,144. The currency was
seized and respondent was taken into custody.
I just received a response from my MP John Weston (Conservative) to the recent letter I sent him expressing my concerns about FATCA:
“Thank you for your letter. I share your concerns about the IRS’s actions in pursuing
Canadians who also have US Citizenship.
I have taken the initiative among Government Caucus members to consolidate information concerning this matter and have worked closely with the Honourable Jim Flaherty, our Minister of Finance, who has taken our concerns forward effectively. Among other things, I arranged for prominent US tax attorney Mark Matthews to come to Ottawa on May 30, 2012 to brief Caucus members concerning these matters. Mr. Matthews not only works with Canadians who have US tax problems but he also served previously as Deputy Commissioner at the IRS.
Concerning the Foreign Bank Account Regulations (“FBAR”) matter, the IRS issued a directive in December 2011, “reviewed or updated June 13, 2012”, that appeared to acknowledge these concerns. You can find the IRS Directive at http://www.irs.gov/newsroom/article/0,,id=250788,00.html <http://www.irs.gov/newsroom/article/0,,id=250788,00.html>
However, as you will see in Minister Flaherty’s statements, which I have enclosed, you will see there is still considerable uncertainty. I join the Minister in recommending that you take US tax advice before making decisions on how to proceed.
Foreign Account Tax Compliance Act (“FACTA”)
Concerning the FACTA matter,
· FATCA has far-reaching implications as it would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians
· Since the beginning of last year, we have raised serious concerns directly with the US
· We strongly believe this is unwarranted
· Canada is not a tax haven and we already have joint arrangements in place to prevent tax evasion
· We strongly believe rigidly imposing FATCA on our citizens and institutions would not accomplish anything except waste resources on all sides.
· While we’re pleased the US has taken note of concerns we’ve expressed on behalf of Canadians by delaying FATCA’s implementation until 2014, clearly this only a first step
· As such, we have and will continue to express our strong concerns relating to FATCA with the U.S. government
· We are actively seeking a solution both countries will find agreeable
I wish you success and peace in resolving how to deal with the IRS. I will continue to work on your behalf and with Minister Flaherty to try to bring this situation to a more satisfactory conclusion for all Canadians.”
This doesn’t sound like a government that is acquiescing to the demands of the US.
@bubblebustin, this would make a nice new post. Hopefully however, you can clean up some of the formatting issues. Our comment editor doesn’t like importing text from other text editors.
@bubblebustin, It’s nice to know that at least the Canadian government is against FATCA. I was surprised that Japan and Switzerland accepted it, and I wish more countries would join Canada.
@petros, would you ask our kind comment editor to do this? I wouldn’t know where to begin (as it looks fine to me from my angle) and you know how I like to break the ‘internets’ when I can 🙂
*Simon Black and other searched-engine sites are reporting that Chile has made an agreement with China to completely replace USD transactions with Chinese currency. The other sites claim that these others have already done the same: Japan, Russia, Iran, India,Brazil