I just came across this article http://blog.kpmg.ch/financial-services/switzerland-is-moving-towards-fatca-implementation/, I don’t recall if anyone has brought this particular article yet, but I wanted to share my thoughts on it for comment.
What I find most interesting is the following, suggesting that the banks do not need to be cancelling or refusing accounts of recalcitrants (as I have argued following my posting of the 21 June Swiss Confederation press release):
Implications for insurance companies
The issue around exiting recalcitrant account holders (i.e. a cancelation of a life insurance policy is not possible) seems now to be addressed. However, Insurance companies might now be faced with group requests under the “administrative assistance” (Amtshilfe) and need to prepare for that accordingly.Implications for banks
Similar to the insurance companies neither an exit of a recalcitrant account holder nor the withholding on proceeds is anymore required. However, Banks will as well potentially face more group requests under the “administrative assistance”. The introduction of a layer of countries that are now entering into intergovernmental agreements will add another category of FFI’s, which in practice will increase the complexity for implementation…
The article also mentions the Swiss government waiver of Art 271 CPS (Illegal acts for a foreign state) in order to enable data transfer, but from what I have heard the banks have to inform the account holder before transferring information, and that the holder can lodge an appeal against the “Amtshilfe” request.
Also, I do not believe that the Confederation can waive 271 CPS in such a critical matter without the approval of the sovereign people as Art 217 CPS was designed inter alia to enforce the constitutional mandate that requires that the Confederation defend the sovereignty of the nation, and the rights of the people (Art 2 CFS et al).
The “Last in Time Rule” upheld by US courts means that even the already shoddy tax convention with the US that we have can be retroactively and unilaterally modified by a subsequent change to the Internal Revenue Code. This means that Art 271 CPS, and other protections are required in order to apply the constitutional guarantees of “Protection against Arbitrary Treatment”, Arbitrary Treatment being one of the nasty effects of the “Last in Time Rule”.
I would ask the Confederation to explain what the “waiver” of 271 CPS actually means. Does it mean that the banks can act directly upon US requests without a proper Amtshilfe request under the Hague Convention (a dangerous precedent which could open the way for US government extraterritorial meddling in further matters that have nothing to do with USP tax issues?) Or does it merely mean that the banks cannot be criminally prosecuted if a request is properly made through Hague Convention central authorities (typically the Swiss Federal Office of Justice and Police or the Cantonal Prosecutor’s Office) , the client properly notified, appeal not lodged or rejected?
The KPMG article appears still to be open for comments, and the article was in English, so this might be a good place for many of us to ask questions and share our opinions. I know that KPMG has a huge market share of the compliance market and that some of you may want to shun the big “IRS-Accountancy-Compliance-Complex” (pls read as parody of Military-Industrial-Complex) but the market share, power and influence of KPMG on some of their large clients is all the more reason to take the debate directly to them.
jefferson…
Don’t know if you saw this from KPMG too…
United States – Analysis of model agreement as FATCA alternative
See my comment here
http://blog.kpmg.ch/financial-services/switzerland-is-moving-towards-fatca-implementation/
@Michael Schneebeli
Thanks for contributing to the understanding of the changes in these various IGAs. I know you are from the perspective of “how do we comply” not “should we comply”, and that is helpful for many of us impacted by the compliance efforts. Translating dull rules into understandable summaries really helps. Even though I liked to complain about the FATCA Compliance Complex, (CPAs, Accounting firms and Lawyers) it is essential that we read and understand what you are saying, even though we would rather not be impacted by any of this.
Thanks again.
@Michael Schneebeli Thanks for that. I also made a quick comment at KPMG (pending moderation)
FATCA implementation is inconsistent with Swiss democratic and constitutional principles.
Months ago, I summed up a list of inconsistencies that FATCA and continued US policy implementation/acceptance posed against the Swiss constitutional and legal framework, I don’t know if you have read. Again, this is not completely exhausive, there are many more arguments (such as the arbitrary effects of a “Last in Time Rule” in the US that pretty much means that the US can ignore the text of tax treaties). I am not a lawyer, but I did the best I could. After all, I am a constituent of the “sovereign” of Switzerland, i.e. the people, and have a right and duty to analyse such deviation from our principles.
Please feel free to read and comment (there is also a pingback to discussion of the same open letter at IBS): http://stopunconstitutionaldoubletaxation.wordpress.com/open-letter-published-on-swiss-francophone-tv-site/
@All For me this is the key part and the most reassuring of Michael’s response:
Hence, do not let any bank force you into signing a waiver. In fact, if they twist your arm to do so, such might also violate Art 271 CPS (SPC is the acronym in English used correctly by Michael for Swiss Penal Code– sorry I have often reverted to the French terminology in my writings at IBS).
Yes, the Amtshilfe (Admin Assistance under the Hauge Convention) rules have and are being relaxed, but I am not certain that all 20 some thousand-plus USPs in Switzerland would be targets of Fishing Expeditions. I don’t think the IRS has the time to prosecute all of the minnows, especially if they continue to balk, but Caveat Pecus / Caveat Piscis, because the net might catch you, be prepared to swim out.
@Michael The June 21 IGA annoucement (if the agreement is actually finalized) would not require witholding as you said in your article “There will be no withholding requirements for recalcitrant account holder”. But you said in your comment to your article at KPMG site “report only customer information under a valid waiver as well as to withhold on FATCA relevant payments.” Did you mean that the waiver was required for FATCA withholding? Or would the witholding be done anonymously for recalcitrants but only on payments received from the USA by the recalcitrants? I guess the witholding could be done in much the same way that Swiss banks automatically withold verrechnungsteueur/impôt anticipé at the source for bank accounts held by Swiss and Europeans… Interest over –I think it is CHF 400 per year correct me if I am wrong– automatically gets hit with a 30-something% witholding, forwarded anonymously by the bank to the Swiss fisc or to the holder’s European country of residence. Thus, the recalcitrant who doesn’t want to report his account to the Swiss fisc can fail to do so, but he pays a tax automatically, a tax that is superiour to what he might have to pay if he declared the account on his Swiss tax return and thus invoked a recalculation and possible tax credit– especially if he doesn’t fall into a high income and/or fortune tax bracket. By the way, I think that this is a pretty fair way of doing things. Most people don’t have imposable (non 2nd/3rd pillar tax deffered)cash accounts with agregate value of over CHF100k (I think the threshold was increased a few years ago) above which the Swiss fortune tax kicks in, and I think that the witholding percentage covers the fortune tax as well.
Here at Isaac Brock Society (IBS) we are concerned about the current accounts and normal sorts of investments held by middle class bone fide resident “minnows” of Switzerland (and also Swiss abroad who are getting shut out of their accounts in CH). These accounts are being closed by all sorts of financial institutions. In light of the July 21 announcement, I do not understand why banks such as Coop announced closures in July (Raifeissen also re-announced the closure of USP accounts several weeks ago). What do the banks risk, especially when aggregate value of accounts held by such a “minnow” in a particular bank might be under the USD 50k threshold?
Also, I heard something about a higher FATCA threshold of 200k per person for bone fide residents outside the US. Was that a rumour, or is it real? ? Of course there is a difference between the individual reporting requirements and the banks’.
Michael, I would like to thank you again for your article at KPMG and for coming to IBS and posting a link to your response, and would hope that you would visit us frequently to read what Brockers have to say as well as discuss the very important issues around FATCA and other US policies that concern so many of us, in Switzerland, Canada, and around the world.