Christophe commented (July 31, 2012 at 1:05 pm):
Some senators are starting to see the bigger picture:
http://www.prnewswire.com/news-releases/washington-expert-applauds-senators-scrutiny-of-fatca-hails-first-nail-in-coffin-of-bad-law-164446156.html
Also, I contacted the senators from my state regarding the subject, and I was happily surprise to receive a phone call saying that they shared the concern, and that it was on their radar.
[Editor’s note: Please also consult Jim Jatras’s Repeal FATCA website.]
It was easy enough for the Congress to ignore FATCA as long as it didn’t think it would have a negative effect on the U.S. and especially U. S. banks. The costs would all be downloaded on FFIs and their customers.
But, it looks like the message is finally staring to get through that there is a domestic cost. I bet the bank lobbyists are working overtime on this.
So long FATCA (in it’s present form), it’s been bad to know about you!
I’ve put http://www.repealfatca.com/ into my “check on this frequently folder”. This is actually quite encouraging. Dare we even dream that FATCA will do a pratfall, tripped up by its own stupidity? Good to see that it has finally dawned on some legislators that FATCA is also a bad idea for the USA too.
Carl Levin should be made a laughing stock.
Unfortunately, I’m not convinced the Senators’ letter means the end of FATCA. Most of Congress remains either so arrogant or so dumb that they don’t or won’t understand that “reciprocity” means cooperation and an exchange of information.
Plus, there is nothing in FATCA that actually requires “reciprocity.” FATCA, as written in law, is simply a one way street. DATCA is, in the words of James George Jatras, “Treasury’s own malign invention, a ploy to get foreign governments to submit to an otherwise unenforceable, counterproductive law.”
Let’s hope Jatras is right and the letter from the Senators–along with last week’s House or Representatives vote–is “the first nail in the coffin of a bad law.” We need to keep pounding those nails in until FATCA is finally buried.
Is Jatras on Brock’s Wall of Fame? If not, he should be.
Blaze: I’ve added Jatras’ site to our external resources. That will make him famous.
A couple of issues:
None of the Senators that wrote the letter sit on the Finance Committee.
I suspect Geithner will simply blow off this letter just like he blew off the two from Boustany.
While all of the Democrats in the Florida delegation are against DATCA none of them serve on the Ways and Means committee.
Does Boustany uses his Republican majority on Ways and Means to subpeona Geithner if he doesn’t get any response back.
*The following are Democrats that voted with Posey to kill the non resident alient reporting rules:
Boren – Oklahoma
Castor – Florida
Chandler – Kentucky
Deutch- Florida
Green, Al – Texas
Hastings -Florida
Himes – Connecticut
Hinojosa – Texas
Kissell – North Carolina
Matheson – Utah
McIntyre- North Carolina
Owens – New York
Rahall- West Virginia
Ross – Arkansas
Schrader- Oregon
*In general these are either very conservative blue dog democrats or are from Florida and Texas.
I seem to recall that Jatras is a big time lobbiest. It is interesting to see how he is getting the message out I wonder who is paying him, but it doesn’t really matter because he is getting our message out there.
Geithner may shrug him off, but he will get some more publicity for the cause.
Concur, this is DATCA hullabaloo. All congressmen are still sleeping through FATCA.
Yes, Mark Twain, it maybe a Hullabullo, but this is getting more attention than it has in a long time, and with the political silly season, you never know what might become a hot topic! Maybe it will become the next #Romneyshambles to dominate a news cycle. 🙂
BTW, this from CF&P
CF&P President: Congressional Vote on IRS Regulation is First Step in Reasserting Proper Legislative Role in Policymaking
The only criticism of FATCA offered by these senators is the reciprocity issue.
They don’t care at all what they are imposing on foreign banks, nor what US persons abroad are facing, nor the vaster implications of penalties, citizenship based taxation, etc…
The only argument they care about is what will it cost US banks to provide reciprocal information to the few countries who have thought to require this.
That and the fact that foreign (tax fraud) capital is now fleeing out of the US, out of fear of being revealed.
It will indeed be hard for the US to publicly defend that (a) they don’t want to do what they mandated every other financial institution in the world to do for them and (b) they want to catch tax cheats except not the ones who are hiding their money within the US.
This was always a weak point of FATCA but it has never stopped them from going forward. There was a video published on youtube in 2010-2011 by a senator when the reciprocity issue first came on the table.
Perhaps now the signing of these reciprocal agreements will be the factor that makes the US either comply with its own rules on its own soil, or back off?
Having said that it is entirely possible that the US does implement reciprocity (to the uproar of the banking industry and certain senators). The main problems of citizenship based taxation still remain.
*As luck would have it, the Model (Reciprocal) Agreement was released by the Treasury and the “Feckless Five” European FATCA-partners-in-waiting within a mere 48 hours of the date of the Senators’ letter.
I disagree with the notion expressed by several posters that the concern of the Senators is merely FATCAT’s potential implementation costs.
The Senators’ letter makes clear that the cost to US financial institutions is only one factor of concern and in political-emotional terms probably not even the most important.
The US domestic system of tax and financial information gathering recognizes virtually no limits on the power of the US Federal government to intrude into the private sphere of its citizens when it comes to their financial and economic relationships. That power of intrusion and power to collect data, however, is predicated on the assurance by the Federal government that its citizens’ data (“tax information”) collected under the auspices of Title 26 will be kept under extremely tight security and will be released only under certain narrowly defined enumerated circumstances. That limit is embodied generally in IRC Sec. 6103 and its regs.
That’s the socio-political bargain: In exchange for surrendering your financial privacy we, the Federal government, guarantee that it will not leave our control and find its way into the hands of third parties or the public at large.
To an extent that foreign governments – and most US citizens – would find astonishing, taxpayer information cannot even be shared internally with other agencies and branches of the US government. In short, this is a sacred trust and the Senators are justified in their concern that FATCA’s promise of reciprocity will punch a gigantic and potentially uncontrolled breach in the dike that keeps US taxpayer’s data “safe” from the vast ocean of potentially irresponsible exploiters of that information. (Not least of whom would be the OECD and other “one-worlders” of that ilk.)
Tax treaty information exchange provisions are one of the exceptions to disclosure but even here the US has historically proven itself extremely sticky fingered about releasing data. Foreign treaty partners on the other hand have failed to reciprocate in the past mostly because few, if any, have anything like the vast digitized data collection systems now installed in the US financial community.
That, of course, is one of the main attractions of FATCA to the Feckless Five and others: an excuse to introduce exactly this kind of vastly intrusive system for their own domestic purposes.
A quick perusal of the Model Reciprocal Agreement, however, should calm the Senators on the subject of the potential cost to US financial institutions of meeting what the Model is pleased to call “reciprocity”. The data the US commits itself to provide is exactly that data that its financial institutions ALREADY collect under Chapter 3 of the IRC (nonresident withholding). The bank interest of NRA that is not currently reported to the IRS IS already reported if it involves a Canadian account and since all bank interest of US account holders is routinely collected and reported, the regulations have always allowed US financial institutions the option of collecting and reporting NRA interest as well if they find doing so is more convenient for them. In short, it won’t cost US financial institutions much to comply – an IT tweak or two.
The Feckless Five and their FFI’s, however, will have to design and install systems nearly from scratch and will have to provide information that is vastly more extensive than that which the US obligates itself to provide.
An appropriate metaphor for “reciprocity” under the Model (Reciprocal) Agreement would be as follows:
The French will design a custom luxury Citroen limosine and build a factory to produce it, the Germans will special order a Maybach from Daimler and build a separate factory to produce it, the English a custom Rolls Royce, the Italians a Maserati and the Spanish? Hell, I don’t know: a SEAT station wagon with gold trim.
In exchange, the US will offer each of these fine countries a Chevy Cruze with the options and color of their choice – provided they can find one on a dealer’s lot somewhere.
Now that’s the kind of reciprocity any US politician or bank (outside of FL and TX, of course)can live with. Whether the voters of the Feckless Five will find it as attractive is another story.
In the meantime, however, I believe that the really serious objection to FATCA and the one that will have the greatest political potency in the US is the threat of a breach of the walls of the “Fort Knox” within which US tax information is presently stored and hence a violation of what has been regarded heretofore as a sacred trust/bargain between the US taxpayer and their Federal government.
@Todundsteuer:
“sacred trust/bargain between the US taxpayer and their Federal government.”
Sacred trust? lol. The reality is quite simple. The OECD (or your “Feckless Five”) realize that they cannot let the galley slaves desert the ship. First they will try to eliminate tax competition (FATCAT) and use media crucifications of “tax cheats” to stem the flow and promote “tax morale”. When that no longer works they will implement capital controls, retirement fund mandates, and even wealth taxes. The banks are not going to take the fall for 100 years of Fed counterfeiting, as always it will be the little guys who get crushed.
So what ever blather congress or the senate makes is largely irrelevant. In most cases these laws are more about making legal all those illegal things that the law makers have long been doing. And if they don’t get it in one bill, they will re-phrase it and slip in into the next one. Or get the executive to ignore it all together.
*Todundsteuer
I believe there is a commitment in the IGA that Treasury will “try” to get Congress between now and 2015 to put some type of more explicit “FATCA” level reporting obligations on US Domestic financial institutions. (So Treasury basically answered the Senator’s question which is for “true” FATCA recipriciocity Congress would have to enact new legislation). Now what are the odds of Congress doing so? I would have to say very unlikely unless the Democrats can take back control of both houses. Treasury does have until 2015 to get it through but I don’t see the dynamics US politics changing enough between now and then that the American public is willing to go back to the 2008-2010 of letting the Democrats have complete control. Now in theory the EU5 could walk from their agreements in 2015 if Congress doesn’t pass FATCA recipriciocity legislation. Will that be an incentive for Congress to do so. I don’t know. One problem with FATCA as a standard is the information collected goes well beyond the typical 1099 or Chapter 3 reporting a US domestic bank sends to the IRS currently. Outside of Chapter 4 FATCA banks generally don’t report to the IRS things such as account balances or beneficial ownership.
I’m again speculating that the Canadian Bankers Assn is behind Jatras:
http://www.thestar.com/business/article/1178970–canadian-bankers-fight-washington
@Todundsteuer:
“Now that’s the kind of reciprocity any US politician or bank (outside of FL and TX, of course)can live with. Whether the voters of the Feckless Five will find it as attractive is another story.”
The voters of these countries have no clue about FATCA. The main people it concerns are foreigners living there, and they can’t vote. The only voters concerned are dual citizen and their spouses, and the people who invest abroad. Even if the story comes out, it will be seen by most, like in most US homelanders see it, as a good initiative to curb tax evasion, as the % of the population affected is low.
It would be so much simpler if the investments were just taxed at the source. i.e. taxes withdrawn by the banks and sent to the governments where the respective banks are located. Automated territorial based taxation. That would simplify things a lot, but might also kill the jobs of a lot of accountants.
Just in case anyone is thinking about painting up a sign and going over to one of Barry’s merry rally’s, you might want to read up on that this wee little bittie change in rules–
http://www.slate.com/articles/news_and_politics/jurisprudence/2012/03/the_anti_protest_bill_signed_by_barack_obama_is_a_quiet_attack_on_free_speech_.2.html
http://jonathanturley.org/2012/03/03/imprecise-language-and-the-risks-of-h-r-347/
http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/crm01547.htm
http://en.wikipedia.org/wiki/Federal_Restricted_Buildings_and_Grounds_Improvement_Act_of_2011
http://www.gpo.gov/fdsys/pkg/BILLS-112hr347enr/pdf/BILLS-112hr347enr.pdf
ie, the moving no-protest zone
*CF&P Applauds Senate Scrutiny of Destructive FATCA Law and New Tax Information Sharing Agreement
@ MarkTwain, thanks for those links.
Here’s more on FATCA Reciprocity Agreements May Cause Delays.
This includes comments about the “Herculean” task of collecting information, push back on quid pro quo agreements, concern about funds being diverted out of US and, of course, the fact some US politicians “are not happy with the idea of reciprocity.” Of course they aren’t. The United States of Arrogance, as usual, wants a one-way street to intrude into independent nations.
I will also post this the DATCA is not Dead thread.
ACA has picked up on this:
Letter from Paul, Lee, DeMint, Chambliss:
http://americansabroad.org/download_file/view/199/1/
Also interesting is the US Treasury Department Statement attached to the letter, which resembles quite a bit the statement released with reference to Switzerland, including the points I think might be very positive: B.3. “…FATCA partner would not be required to: a. Terminate the account of a recalcitrant account holder; b. Impose passthrough payment witholding on payments to recalcitrant account holders; c. Impose passthrough payment witholding on payments to other FFIs…”
ACA Press Release on the Senators’ position:
http://americansabroad.org/download_file/view/201/1/
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Don’t know if this matters, but the article just got reprinted here: http://www.melodika.net/index.php?option=com_content&task=view&id=345788&Itemid=54
It’s been more than 30 days since Geithner received the letter from the four senators, and no response that I know of (nothing on ACA). This guy must have always been late for class.