By Vanessa Houlder in London and Shahien Nasiripour in Washington
The US and Europe’s five biggest economies unveiled fresh details of their coordinated push to crack down on tax evasion on Thursday, in a move that promises to ease the burden on financial institutions that have been enlisted to gather information.
The announcement paves the way for the US to exchange information on account holders who are citizens of the UK, Italy, Spain, France and Germany with tax authorities in those countries. In turn, those authorities are to share information on US account holders with the Internal Revenue Service, the US tax authority.
More at: Financial Times: US and Europe in accord on tax evasion
*Now, is every single bank in the USA going to assure that their account holders were not born in UK, Italy, Spain, France and Germany?
Unlikely.
A full exchange of information on Citizens of all of these ? That’s a new twist. What do these other countries have up their sleeves?
I wanted to share the following with all of you, without opening a new thread:
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We all need to fight against injustice and prejudice. Everybody has a right to manage her/his affairs as they see fit.
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Now I am going to tell you the story of some people that just wanted to go about their personal and family business in a correct and Christian way.
An Italian couple from a neighboring village runs a grocery that I visit from time to time. They are in their early 80’s, not wealthy at all, they are almost getting by from very modest social security pensions and still running a very small shop that they had in parallel with other work and small business activities that they worked hard at since they came to Switzerland in the late 50’s or early 60’s. In this way, they can still pay their unplanned expenses and help their families and friends here and there.
They don’t have credit cards, except perhaps a PostFinance payment card that only works in Switzerland these days. They pay their bills via postal account and have modest accounts at a bank and at the PostFinance. They haven’t gone on a vacation outside of Switzerland or Italy in years.
A friend of theirs died in Italy. They wanted to pay their last respects. They paid for tickets in advance from their accounts in Switzerland, and brought some cash with them (in Swiss Francs). They stayed with relatives in Italy. When they wanted to buy some flowers and help with other things for the funeral as well as their food and other minor expenses, they realized that they didn’t have Euros (because they had left Switzerland in a hurry).
They went to financial institutions in the small Italian town they were visiting. They spoke fluent Italian of course (their family in Switzerland is perfectly bilingual). But they hadn’t lived in Italy for decades and their only means of personal identification consisted of their perfectly valid and authentic Swiss passports.
All they wanted was Euro change for a few hundred Swiss Francs. They were told to get lost at several places: “go to your hotel”. [What hotel – they were staying with relatives who were running around at the other end of town to solve other funeral arrangement problems.] Finally, an Italian citizen with a local bank account politely went to his bank for them and changed their money.
Why? FATCA? No, I don’t think so. Not specifically. What was it? I think it was just xenophobia directed against expatriates (even of modest means). My blood boiled when this couple told me the story. The US is not the only country in which former members of its “family” are mistreated. I had greater hopes for Europe.
The US government is worse. It fiscally massacres people of modest means who dare to live outside of the homeland with their families. FATCA is just the horrific nasty side of ol’ Unca Sam today. Such nasty side has the tendency to scare people into not being old fashioned honest folks. The Italian guy that helped my acquaintances was able to yield to his old-fashioned instinct and honor. God bless him. He didn’t give a damn about some stupid law that was drafted to prevent the money laundering (there are plenty of anti-money-laundering laws in Italy) perpetrated by people that had nothing to do with our venerable retired couple.
You see, the honorable Italian fellow that changed the money for my acquaintances didn’t ask for anything in return. Do a good turn daily. But had the country that the old couple had been visiting been the US instead of Italy, perhaps nobody would have helped, or if they had, they might have been in fear of the IRS: “OH…. You helped some folks launder money”?
Traitors because they lived abroad for decades…? But they still came back respectfully, didn’t they? They paid their respects honorably, this gentle Italian couple.
*What I can say is that in the past few days the Brazilian Newspapers are saying that Brazilians have trillion dollars in tax paradises elsewhere. It may be a coincidence but it called my attention. Personally I could care less for FATCA because I am already sending my FBARS with all my necessary accounts in Brazil with money that I earned from my work here. I have never invested one US cent earned in the US in Brazil. But I wonder how the Brazilian Banks are going to know accounts of dual citizens and of Brazilians living in the USA who have Green Cards. But I am not going to become sleepless on this. I also do not know if the Brazilian banks are going to cater to FATCA but again this is not my problem.
*There’s that sloppy language again, which doesn’t differentiate between citizens and residents. From the actual “Model agreement” which I found on this UK site
http://www.hm-treasury.gov.uk/press_67_12.htm
I see that the reference is to “residents” of the “FATCA partner” countries, and US persons. I also think that there is a provision for making exceptions for any retirement plans regulated by the “FATCA partner” country. I just skimmed it. I’m too tired to go through the whole thing to see what else is there. Maybe someone who is better at understanding the language of financial regulations will find other interesting things in it.
@MarkPinetree, I have heard that Citibank in Brazil is already asking all new customers if they are US citizens or permanent residents, before opening accounts. If they are, they are given a form to fill in their US social security number. I suppose this is because of FATCA, and because Citibank is a US bank. The Brazilian bank federation already stated at the IRS hearing that FATCA is illegal in Brazil without a specific treaty with the US, but apparently Citibank doesn’t care, or it’s not really reporting anything yet and only collecting the social security number for now. Brazil doesn’t even have an income tax treaty with the US, so I don’t think it will sign a FATCA agreement.
*Brazil has no Income Tax or Social Security Tax treaty with the USA.This complicates a lot my life as a dual citizen living and working in Brazil. I don´t know how Brazilian Banks will deal with FATCA but I will not be surprised if they will cater to it. But I am not afraid of FATCA because I have been sending my FBARS reporting all my bank accounts here. I never invested one cent of money earned in the USA in Brazil. I only invested here on money I earned working here. I believe that it is a mistake – unfair – to lump together Americans and Dual Citizens Living Abroad with American living in the mainland who have hided investments in Foreign Countries. But of course, having no representation (except for ACA: http://www.aca.ch) nobody will listen to me (us). And it seems to me that this is the way the IRS will go: they will not separate these different situations and are going after all foreign accounts even thought in a sense my accounts in Brazil are nor “foreign” because I am living and working here. It is becoming impossible for me (will be 80 in November) to go year after year complying with all these increasing demands and coping with the fear of incredible penalties for my mistakes. I consider myself a casualty in the attempt of the IRS to go after tax cheaters including us.
A little analysis from Wealth Briefing…
Latest Developments On How US FATCA ACT Will Work
On balance, does the new guidance add or detract from the severity of FATCA and its provisions?
The intergovernmental agreement still requires financial institutions to share nearly the same amount of information that would have otherwise been required under registration with the IRS. The only difference is that it will be provided directly to their government. Some of the items required to be shared include US account holders’ information such as:
a. Name, address, and US taxpayer identification number
b. Account numbers
c. Account balance/value
d. In some cases the amount of income generated by the account
One important aspect to the intergovernmental agreement is that to the extent a participating financial institution has an account holder which will not provide information to them to identify themselves as US or non-US (this is called a recalcitrant account holder) the financial institution will not be required to implement withholding taxes or close the account as long as the US government receives information from the institution (such as some of the items listed in item 4)
What major areas of uncertainty remain after this new development?
Timing is an issue with respect to FATCA registration. Generally FATCA registration should take place no later than 6/30/13 in order to be viewed as FATCA compliant by 1/1/14 (1/1/14 is a key date as this is the starting point for US withholding agents to start withholding on certain US-sourced income ). Since the model agreement is not finalized financial institutions will need to monitor its finalization. Rather than rush to IRS registration it may be prudent to wait to see when these agreements may be finalized. It is anticipated that final FATCA regulations as well as the actual FATCA registration process will be completed by 12/31/13 but its unknown as to when each respective government may sign an agreement