Germany will not meet its Foreign Account Tax Compliance Act (Fatca) obligations if the US reneges on an intergovernmental agreement with the country, an observer of the US legislation warns.
….Frankfurt-based Martin Schulte, head of capital markets at the Association of Foreign Banks in Germany, agrees reciprocity is key for Germany to engage in an intergovernmental Fatca agreement. “The reciprocity is one of the key issues for the German government,” he says. “Although I don’t think the German Treasury expects there are too many German citizens hiding in non-transparent vehicles in the US, reciprocity is a matter of principle – like a balance of power and ‘we’re not just following the US wherever they go: if they want something from us, we want something back’.”
The comments come on the back of growing concerns that the agreement is not legally binding on the US side. As such, European participants fear US banks may struggle to supply relevant data to a growing number of individual countries as part of the reciprocity agreements, and may decide not to honour them.
Schulte expects the German government won’t take kindly to any kind of rescindment from the US on the intergovernmental agreement. “If it turns out the agreement wasn’t properly enforced on the US side, then I don’t think the German government would undertake substantial effort to enforce the German Fatca implementation, even though it’s going to be a national law,” he says.
As well as the five intergovernmental agreements, the US has entered into so-called model II agreements with Switzerland and Japan. Nordic countries have also been pushing for reciprocity-style agreements.
Schulte warns this may have a negative impact on the reciprocity process. “Unfortunately, if other partner countries insist on reciprocity too, US banks might face even more effort and compliance costs than their foreign counterparts, since they will have to identify and report customers from not only one but from various countries. It’s hard to imagine this could really work.”
FATCA in Switzerland as of July 5th:
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http://dataguidance.com/news.asp?id=1812
29 minutes ago: Swiss-US tax deal slips into the distant future. “A solution soon is unrealistic”. “In short, the readiness to jump on to a global solution is increasingly vanishing.”
http://bazonline.ch/schweiz/standard/USSteuerdeal-rueckt-in-weite-Ferne/story/18575466
@Petros:
“Tea Party is our natural ally on the US side of the border. The Tea Party is not racist, but have been dubbed as such by their opponents to discredit them.”
Know thy enemy. Of course I realize that the Tea Party is far less racist than the Democrat party. But the leftist reality bubble and their propaganda organs long ago tried and convicted the TP of racism. As you say the TP are “our natural ally”, and it is because they are tax resisters just like IBS and that is why this Salon hit piece (Tea Party Shields Tax Dodgers) associating expats with the TP is so significant. Just take this paragraph:
Salon is a prime progressive propaganda organ, and we have witnessed a veritable onslaught of progressive attacks against expats (aka: tax cheats) in their other organs like NYT, WaPo, HuffPo, while WSJ has about the only sympathetic opinion columnist in the MSM. By associating expats with the TP the progressives link them, in the eyes of the leftist core special interest groups, to racism. In this fashion they have made expats into a splinter group of the racist Tea Party.
You certainly cannot expect any assistance from the left in repealing citizenship based taxation. Democrats who pretend that their party isn’t the party of soaking the unpatriotic “rich” “tax cheats” who live overseas are not only hurting themselves but everyone other IBS contributor.
@swisspinoy;
Thank you for providing that information about how Swiss mortgages work – re the re-financing process and the balances that must build up until payment is allowed. Similar to another recent comment by @Lisa, about how mandatory FORE retirement plans in Mexico do not fit the US conception, and thus have no recognition or relief from punitive US extraterritorial tax treatment. http://isaacbrocksociety.ca/2012/07/28/retirement-plans-get-relief-from-foreign-asset-reporting-law/#comment-41683
We all benefit from learning about the global variations on the compliance burden that US extraterritorial taxation shackles us with – particularly where it is in significant conflict with our local, homecountry laws and conditions.
It is very valuable for us all to be reminded that the citizenship-based model will inevitably result in collateral damage and injustice – because it can never, and will never be designed to account for global variations in systems where we actually live, earn and save. And the US and IRS doesn’t care about complexity or injustice or ethics in this respect. It is inconvenient for them to recognize the inherent contradictions and injustice built into what they impose on us. They are content to punish those deemed US ‘persons’ abroad in the pursuit of their goals – fully conscious of the fallout.
The US does not care how things work anywhere else. It is most practical for them just to continue to insist and enforce a framework that foists compliance on others – no matter what that takes from us. As with FATCA, they foist the onus on others – backed up with threats and force, because they can. They won’t be deterred by reality or inconvenient details.
Another issue similar to that of the Swiss mortgage, is that anyone who takes out a loan – for a house or car, business, or post-secondary tuition, will temporarily have sums in their accounts which are actually debt – a negative, which the US treats as an asset for tax reporting and penalty purposes. The mortgages and other loans/debts are frequently held with a partner or spouse – many of whom are not US taxable persons. So, we’ve got the US creating and enforcing imaginary accounting, treating debt as assets for reporting and penalties, and, holding us responsible for the imaginary total, when the deemed ‘US taxpayer’ only ‘owns’ part of it.
*@Petros: You will lose a lot of people from this site if you push your small-government, tea-party beliefs. Please keep this site outside of the left/right argument. Thank you.
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New discussion of Germany IGA discussed here and here
This last statement interests me most. “Both sides are to create the conditions for the early signing of the Agreement.”
Is that a reference to the reciprocity requirements that Germany demands which can only happen if there is legislation in America? Germany certainly seems to require these conditions, and the US has yet to create them!!
Another Nigel Green post on Germany
Germany – another stumbling block for America’s dangerous new FATCA law?