Next Tuesday, two bankers who now work for Taiwan’s executive branch will meet some people from the Bankers Association (yes, that’s their official name, not Bankers’ Association) in order to get recommendations on how to help banks deal with FATCA. Unsurprisingly, the Bankers Association is recommending complete and total surrender, without even asking for anything in return from the IRS. And the worst part is, the media are barely paying any attention to it. The only coverage I’ve seen at all is an article in Taiwan’s Apple Daily earlier this week, which I’ve translated below.
美肥咖追稅 銀行公會21日提建言 |
U.S. collecting taxes with FATCA; Bankers Association to present recommendations on 21st |
| http://www.appledaily.com.tw/appledaily/article/finance/20120814/34437328/ | |
| 建議簽跨政府協議合約 並接手解決問題 | Suggests signing inter-governmental agreement, handing over resolution of problems to government |
| 2012年08月14日 | 14 August 2012 |
| 【廖珮君╱台北報導】美國政府全球大追稅有解，銀行公會建議由台灣政府和美國簽「跨政府協議合約」，取代國銀和美方簽約。一旦台美可簽跨政府協議，國銀將可免除被美方課稅、免報送、免關閉不合作帳戶，也不違反個資法。 | [Liao Pei-chun/Taipei] There’s a solution for the U.S. government to collect taxes all over the world. The Bankers Association suggests that an “Inter-Governmental Cooperation Agreement” signed by the Taiwan government and the U.S. can take the place of the country’s banks each signing agreements with the U.S. side. This would avoid the need for reporting and for the closure of uncooperative accounts, and would not violate the Personal Information Protection Act. |
| 我力爭「非互惠版」 | Our side strongly recommends “non-reciprocal version” |
| 銀行公會將在21日與行政院長陳冲、金管會主委陳裕璋座談時提出建議。據了解，美方在7月時提出跨政府協議模式合約（model agreement），分互惠版和非互惠版兩大版本，我方力爭採免簽租稅協議「非互惠版」跨政府協議合約。 | On the 21st, the Bankers Association will hold a meeting with Premier Sean Chen and Financial Supervisory Commission Chairman Chen Yuh-chang at which they will present their recommendations. According to sources, in July the U.S. presented its inter-governmental model agreements, consisting of reciprocal and non-reciprocal versions. Our side strongly recommends the “non-reciprocal” version of the inter-governmental agreement which does not require the adoption of a tax treaty. |
Germany firmly told the U.S. that if the IRS wanted German banks to foot the bill to become American tax collection agents, then American banks would have to do the same for Germany. Russia’s Ministry of Foreign Affairs told their banks to quit their incessant whining and deal with their own problems because Putin wasn’t going to sign some disgusting surrender agreement. But none of that messy resistance for Taiwan, which is apparently happy to sell its territorial sovereignty to the lowest bidder.
What’s really sinister about this whole situation is that we don’t even get the names of the bankers who are pushing this thing. A journalist giving anonymity to a corporate source is one thing — the source might not be authorised by PR or legal to speak on the record, for example — but this article doesn’t even tell us the name of any of the officers of the Bankers Association, which is public information that can be found on their website. So let me fill in that deficiency: the chairman of the Bankers Association is named Liu Teng-cheng (劉燈城). He is concurrently the president of the Bank of Taiwan, a government-owned commercial bank.
Furthermore, in as thorough an example of regulatory capture as you can get, Sean Chen himself came from a banking background himself before entering politics, and may in fact know Liu Teng-cheng personally from many years ago. Liu is practically the same age as Chen. Both men studied in National Taiwan University’s Faculty of Law around the same time (Liu as an undergraduate, Chen as a master’s student) and served in Taiwan’s Ministry of Finance together. The two have even held the same position of Deputy Minister of Finance at different times.
Fortunately, we have FSC head Chen Yuh-chang to introduce some diversity into the mix: he is younger, graduated from a different department of NTU, worked in different sections of the Ministry of Finance before joining the private sector, and is the chairman of a different bank. Also, the picture attached to the article clearly shows that the men involved favour different numbers of buttons on their suits. I’m sorry, what’s that, you wanted ordinary members of the public to have a say in what’s going on here with their bank accounts and their privacy laws? You think this is some sort of democracy? Hah!
| 據美方官網，互惠版是屬兩國資訊交換，但適用和美方簽有租稅協議和個案資訊交換，如歐洲5國（法、德、英、義大利、西班牙）。非互惠版則適用和美方未簽租稅協議者，如台灣。若雙方簽屬、成為美方「肥咖夥伴國（FATCA Partner）」後，台灣就需提供美籍客戶在台資料給美方，屬單向資料提供，美方不需提供資料給我方。 | According to a U.S. government website, the reciprocal version allows for the exchange of information between two countries, but is applicable only to those countries which have already signed conventions with the U.S. on taxation and exchange of information, such as the five countries in Europe (France, Germany, the U.K., Italy, and Spain). The non-reciprocal version applies to countries which have not signed tax conventions with the U.S., such as Taiwan. If the two sides sign, and Taiwan became a U.S. “FATCA Partner”, then Taiwan would have to provide information about customers with U.S. nationality unilaterally, while the U.S. side would not have to provide any information to our side. |
Ms. Liao should be congratulated for her description (in bold above) of whose data will be provided to the US, which can also be seen in her second article on the topic. It’s only a one-character difference (美籍客戶 vs. 美國客戶) from how the rest of the Chinese-language media describes FATCA’s targets, but it at least alludes to the fact that the U.S. imposes tax based on citizenship rather than geography like every other civilised country on earth. This is a welcome contrast to all of those dishonest IRS press releases which obliquely refer to “U.S. taxpayers” without clarifying the uniquely broad scope of that term. Liao also clearly points out the grossly unequal nature of the relationship which the Bankers Association would like to impose on Taiwan. But sadly, her article doesn’t spend any more time exploring the implications of this deal for the tens of thousands of people in Taiwan with U.S. passports or green cards.
| 銀行主管說，依美方規定，簽屬跨政府協議後，金融機構須有實質審查程序，例如如何辨識美國帳戶、提供哪些帳戶給美方等實質審查，若台美要簽屬，需約束我方金融機構遵守這些審查程序。 | A bank officer stated, according to U.S. regulations, after the signing of an inter-governmental agreement, financial institutions would be required to implement some concrete procedures, such as how to identify U.S. accounts, what data would need to be supplied to the U.S., and other substantive investigation. If Taiwan and the U.S. sign an agreement, our side’s financial institutions would be required to comply with these procedures。 | |
| 公會籲政府接手交涉 | Association recommends government take over the negotiations | |
| 據公會建議版本，建議由我方和美國稅務局直接簽政府間協議，解決銀行適法性和實務執行上的困難。也就是說，若可簽跨政府協議合約，國銀不需關閉不合作帳戶，也不會違反個資法，也因不需直接將客戶帳戶報送美方，免和美方連線，國銀可降低遵循成本。 | Under the Bankers Association’s proposal, our side would directly sign a cooperation agreement U.S. Internal Revenue Service in order to resolve the problems of legality and implementation. That is to say, if an inter-governmental agreement could be reached, then banks would not have to close non-cooperating accounts, and would not violate the Personal Information Protection Act. Also, because banks would not need to directly supply customer information to the U.S., they would avoid the need to liaise with the U.S. side, and our country’s banks could lower their costs of compliance. |
This looks very similar to what we saw over in the Netherlands: the banks are making an end run around the legislature. If global information exchange (what Just Me calls “GATCA”) is really coming, then that should require a formal amendment to data protection laws to be drafted, introduced in the legislature, passed, and then treaties proceeded with. That way the diplomats could be confident in the knowledge that the information exchange proposed therein would be guaranteed legal under domestic law.
Right now, Taiwan’s data privacy laws are silent on the specific topic of international transmission of information by a government agency, but in any situation involving disclosure of personal data they require individual written consent, lack of harm to the interests of the person whose data is being transmitted, or an actual law authorising the transmission of the data as part of the job scope of the government agency involved. And the law is even more clear on the limits of non-governmental agencies (I’ve cleaned up the Ministry of Justice’s translation a bit for purposes of this post). This is the only law on the subject which has been enacted by a vote of the people’s representatives:
| 第21條：非公務機關為國際傳輸個人資料，而有下列情形之一者，中央目的事業主管機關得限制之： | Article 21: If a non-government agency transmits personal information internationally in one of the below situations, the government authority in charge of the subject industry may take limiting measures: |
| 一、涉及國家重大利益。 二、國際條約或協定有特別規定。 三、接受國對於個人資料之保護未有完善之法規，致有損當事人權益之虞 。 四、以迂迴方法向第三國（地區）傳輸個人資料規避本法。 |
|
But instead of respecting existing laws, the banks want the executive branch to immediately jump into negotiating the sale of the country’s surrender to the IRS. Once that is done, the executive can present the legislature with a fait accompli which they will be pressured into ratifying on the grounds that failing to do so would affect the country’s international reputation. We can only hope that Taiwan’s legislators are as incensed by this anti-democratic behaviour as the Netherlands’ legislators were. I fear instead they will provide us with a real-life example of that old pro-Beijing canard: that Taiwan will happily sign any international agreement just to try to prove their government still exists diplomatically, without regards for the actual, humiliating contents of that agreement.
| 銀行主管說，政府因應FATCA成立專案小組，但卻多由公會去函美方爭取放寬相關規定，力道和位階不如政府，而美方已提跨政府協議合約，應由金管會和財部接手和美方交涉解決海外帳戶課稅問題。 | A bank officer stated, the government has set up a working group to deal with FATCA, but even though the Bankers Association has sent letters to the U.S. side urging them to relax the relevant provisions, they are not as influential as the government, and since the U.S. side has already brought up the idea of inter-governmental agreements, the Financial Supervisory Commission and the Ministry of Finance should take over the negotiations with the U.S. side to resolve the problem of taxation of overseas accounts. |
| 美國「外國帳戶稅收遵從法」是為防堵美國人透過境外逃漏稅，美國國稅局要求業者提供美國籍客戶所得、收入、資本利得等資料。若台灣金融機構不從，恐將被課30%懲罰性稅負。 | The U.S.’ Foreign Account Tax Compliance Act aims to prevent Americans from using foreign territories to evade tax. The U.S.’ Internal Revenue Service requires industry members to provide information on their U.S. customers’ capital gains, income, and interest. If Taiwan’s financial industry does not accede, they could have a 30% punitive withholding tax imposed on them. |
In otherwords, after having attempted to put up some resistance to FATCA and concluding that their efforts are useless, the banks are now attempting to push all the costs and harms onto the public, without any democratic consultation. Nothing new to see here. Move along, folks.
The dollar is the worlds reserve currency, and the US ruling elites are going to do their best to keep it that way as long as possible. FATCA, like AML, is designed to force the worlds finance industry to kow tow to the Fed and the wall street banks. What do Taiwan and all the G20 get out of this? Why freshly printed dollars of course, if not through their Fed authorized primary dealer banks, then through currency swaps with their central bank.
The Central Banks and Wall Street Banks know that this fiat currency experiment is unraveling at an increasing rate, and they want to be on the winning side when it collapses. The Fed is the only one with a reserve currency printing press, and no large bank or CB wants to risk being cut off at a critical juncture. The truth is that these banks are betting on a ruling elite crackdown on dissent and a take over of power through world government.
Eric, thanks so much for the hard work and keeping us informed about developments in the Far East.
China claims Taiwan. The US has promised to protect Taiwan (though I wonder how well they would keep their promise today). I don’t see that Taiwan really has a choice. If the US withdrew its protection, wouldn’t China just take over?
*Given Taiwain’s precarious position as a renegade province if China, It has an incentive to kow-tow to the US that fully sovereign nations do not have. If it should fail to do this it could wake up one morning to find that it no longer exists
@Petros & Roger: Well, Taiwan gets two things from their relationship with the U.S.: arms sales and the Seventh Fleet hanging around the Taiwan Straits during times of tension. But the Obama administration has already taken a decidedly cool attitude towards military cooperation with Taiwan, e.g. blocking new sales of F-16s. I don’t think Taiwan playing nice on FATCA is going to change Obama’s position. (Of course, the number of people in Taiwan who have both heard of FATCA and who are thinking of Taiwan’s long-term strategic military interests instead of their next paycheck is probably zero.)
In contrast Romney has spoken out in favour of Taiwan arms sales. So a mildly-bright twelve year old could tell you the smart thing for President Ma to do: wait until after the U.S. election to make any move on FATCA, and Taiwan might get their arms sales anyway without having to give an inch, or at least without having to give away the store. Instead the idiot bankers are already publicly waving the white flag to the IRS — not even demanding reciprocal information exchange, let alone considering if they can use FATCA compliance as a bargaining chip for something else Taiwan really wants.
Eric, there are a lot of arms producers. Why does Taiwan HAVE to buy from the US? North Korea is much closer, geographically-speaking 🙂
It’s been interesting seeing reactions to the FATCA. I would like to ask these bankers what they are going to do when the US asks account details for non-US citizens! Give them an inch, they’ll take a mile. All they have to do is add 30% penalties to get anything that want.
Confederate, we’re always going to need a medium of exchange. Some people say that gold is the answer, but gold is a commodity like oil. Where you have it, you usually have strife, wars, problems, etc.. AND it’s harder for politicians to manipulate, so I don’t think we’ll see a move away from the fiat currencies anytime soon. Don’t forget, gold is denominated in dollars too.
Geeez wrote: “Gold is denominated in dollars”.
Exactly. That’s why gold is in a secular bull market while the Fed and the banks dilute the dollar to nothing. Consider these musings:
The trouble with gold being harder to manipulate is exactly why the world will go back to precious metals for trade–or a hard currency backed by precious metals on demand. In Zimbabwe, gold dust is currency.
I have small position in physical metals which I store in a more or less safe place (not at home). Thursday I went to our local coin dealer (Canadian PMX) to find that only one silver round and one silver Maple was available; someone had preceded me at the store and had bought 500 maples and rounds (cost would be about $15,000). This is a little anecdotal information, to be sure, of limited value. But a few people, may be 1% of all North American investors at this point, have lost confidence in paper currencies and are turning to metals to protect against the inevitable destruction of paper currencies, especially the US dollar.
The next silver short squeeze will result in supply shortages all the way down the line. There still seems to be a lot more paper metal (gold and silver) than physical metal.
Ron Paul has a reasonable suggestion, that the government give up its monopoly on money and allow trade to take place in precious metals as an alternate currency. Once people have seen their life’s savings wiped out by dollar devaluation, like pensioners in Germany during the Weimar Republic, then most Americans, I think, will see the wisdom in Paul’s suggestion.
Both the United States and Canada have very large cash only underground economies. This is off the radar and something that governments’ can’t control. If governments continue to manipulate and devalue paper currencies, gold and silver will become a medium of exchange whether they like it or not. In Canada it would be in any case legal, because our Canada mint coins are legal tender for the face value. Then the vendor could sell me a car $50,000 for 31, $50 Gold Maple Leafs at a sale price of $1550 CDN dollars–that is until the Canadian government closes the loophole.
*@Eric, what could our should Taiwan have insisted on for reciprocity purposes in agreeing to abide by FATCA requirements? Taiwan is essentially a territorial tax country which only recently has started taxing the foreign earning of its residents. Now residents of Taiwan are subject to tax only on foreign earnings in excess of NT$ 1 millon. That is about US$33,000. I’m not a banker and have no idea where Taiwanese hide their money abroad, but I suspect that it might be Bermuda, Bahamas, Cayman Islands or Switzerland where taxes are either very low or non-existent but interest rates are higher than in the US. Although they could deposit their money free of US taxes in US banks, I suspect a willingnes of the US to provide this information to the Taiwanese government was not worth very much to them.
I suspect that hoping in the long range that the US will act as a big brother to them if bullied by their next door relative is more important to them than any reciprocal information on Taiwanese resident’s bank accounts in the US.
Ideologically I think it would be difficult for Taiwan to purchase arms from North Korea since ideologically they are poles apart and don’t even maintain any semblance of diplomatic relations. with each other. Buying arms from North Korea would result in total withdrawal of all support from the US. And that is not what they want to happen by any stretch of imagination since the US is one of their most important customers for exports. and thus vital to their economic survival.
*Just to take a counter example. Canada has over the last few years become a very close ally of Israel especially at the party level between the Conservative Party of Canada and the Israeli Likud Party. Some of this I believe comes from the personal policy preferences of the current leadership some of it comes from a desire to try to neutralize some of the longstanding anti-Canadianism that exists in the US Congress(Its tough for Chuck Schumer to get on his anti Canadian high horse when the current govt of Canada is so pro Israel and Chuck Schumer is pro Israel himself. Where it gets even better is privately most US democrats for ideologically reasons don’t like the Israeli’s Likud Party but cannot say so publically) . On the otherhand the current govt. of Canada has basically little or no interest in Taiwan all of its relations with China are strictly channeled through the mainland and Beijing. So Taiwan overall is pretty isolated even from countries that might seem to take a more “principled” view of foreign policy.
Hah, Taiwan is a joke, this just goes to show it even more.
If China dethrones king dollar Taiwan will crumble within days. The elites there have either made their peace with the communists or have an escape hatch ready. There is no chance that the US and Taiwan have the balls let alone the firepower to stop a full on Chinese invasion. The real defensive perimeter would be around Japan. Any ship within tactical missile range of Taiwan (a few hundren miles anyway) would be at extreme risk, and likely China would have may surprises.
But it won’t come to that anyway. The US is broke but is still useful as a target for Chinese mercantalism. Once the US defaults or hyperinflates or starts a full on trade war then all bets are off. As a major creditor China will hold most of the cards. If China has control of the gold markets too then she will have won the financial war.
Taiwan will be forced to leave the US orbit and it will happen when the dollar collapses.
Peter, I didn’t say here, but you still deal with the fluctuations since gold is a commodity. In 1998, another commodity, oil, went down to $10/barrel that created a massive chain reaction all over the world. Many Asian economies collapsed, a few funds went belly-up like Barings. LTCM in the US also went belly-up and they got bailed out. Brazil crashed and interest rates went up to 80%/month to keep capital from flying away. US markets took a big dip (but eventually going much higher after the recovery).
Gold in 2000-2001 went to $280’something an ounce. I was buying at the time, but since I couldn’t bring it with me here, I had to sell it for about half of what the price is today. I don’t know if you remember the Hunt brothers, who corned the silver market many years ago… I’m saying this because there can still be some manipulation going on.
All that being said, I doubt we’ll will ever see anyone/anything become a “SERIOUS” threat to the dollar. Look at what happened to *ANY* US President who tried to change the system and put more control of the money with the people. It’s no conspiracy really… either they were all killed or had people attempt to kill them.
About dillution, I totally agree, but gold prices don’t necessarily fluctuate according to adding more dollars to the system because you have to take production and industrial use into consideratoon (along with many other things). If someone is a gold bug, then that’s fune. I’m not against gold; I just find it riskier than real estate, that’s all.
*Think Taiwan’s the only one who’s thinking of rolling over? Here’s more of a nightmare closer to home. Publicity courtesy of the UK papers. http://www.institutionalassetmanager.co.uk/2012/05/08/166040/ific-requests-changes-proposed-fatca-regulations. IFIC is the Investment Funds Institute of Canada (IFIC).
@Animal,
http://www.institutionalassetmanager.co.uk/2012/05/08/166040/ific-requests-changes-proposed-fatca-regulations
The link you provided doesn’t work, but the one above looks like it’s the same page.
I note it says:
“IFIC believes that an intergovernmental
agreement or comparable bilateral tax information sharing agreement
would be the best way to address the potential issues that may arise in
the Canadian jurisdiction based on the current wording of the draft
regulations.”
……“An intergovernmental agreement would provide US tax authorities with
the information they require without placing an undue burden on
Canadian investors and financial institutions,” says IFIC President and
CEO Joanne De Laurentiis. “We believe an agreement may be able to
accomplish something that the final FATCA regulations may not.””…….
and,
……”IFIC has commented previously on FATCA and
has been working with the US Treasury and the IRS on these issues. For
this submission, IFIC has collaborated with the Canadian Bankers
Association (CBA), the Canadian Life and Health Insurance Association
(CLHIA) and the Investment Industry Association of Canada (IIAC).”…….
see also here http://isaacbrocksociety.ca/2012/03/05/reply-from-canadian-bankers-association/ Many members of the IFIC, the IIAC and the CBA are interrelated. I don’t know about the CLHIA. Plus the IFIC also has affiliates which include large law firms, see member list at;
https://www.ific.ca/Companies/CompanyDirectory.aspx
and mandate here: https://www.ific.ca/Content/Content.aspx?id=61
and specifically taxation matters:
https://www.ific.ca/Content/Content.aspx?id=3898
“IFIC works with members to develop and take positions on tax matters to
federal, provincial and, sometimes, foreign governments and to respond
to requests for comments from governments on specific matters.”
*The upshot of the whole debate is that every financial lender seems to be willing to throw American expats under the bus. And I’m one Canadian-born Canadian with no ties to the US who is sick and tired of what the United “Extortionists” of America are trying to do to my wife and other American expatriates. And you can be sure that my nationalistic pride in my country is extremely pissed off that the banks are willing to defy Canadian Banking Privacy laws to bend over and take it up the “you-know-what” by the IRS.
@Roger: as a negotiating tactic, Taiwan could insist on reciprocity even if they have little use for the data. At least for corporate bank accounts, they could claim with a straight face that they need it to conduct transfer pricing audits. That way if the U.S. can’t deliver on reciprocity as is looking increasingly likely, Taiwan can insist on other concessions, either with regards to FATCA (e.g. further exemptions for pension funds and insurance companies, “local FFI” status for Taiwan banks doing business in mainland China, etc.) or in unrelated areas (e.g. more arms sales, less pressure to lower agricultural trade barriers, some agreement on intellectual property issues which might help their exporters like HTC, etc.).
@Animal: yes it’s not surprising that they’re throwing American expats under the bus, but it’s more surprising that they’ll do the same with their own voters — in particular the immigrants in the US who are also going to get screwed by this and mostly don’t even know it’s coming. Taiwan doesn’t have absentee voting, so they have to fly back if they want to vote — I suppose the clowns in the government don’t think that any of them will bother, or they’ll be so broke after having their savings looted by the FBAR scam that they won’t be able to afford a trans-Pacific flight.
@ConfederateH Taiwan has already given up on the strategy of resisting a full-scale mainland invasion. Back in the day when Taiwan’s economy was growing while the mainland was busy killing sparrows and shouting slogans that was a good strategy. But now they know they won’t be able to outrun Beijing’s military spending forever, their new goal is to have the capcity to inflict the maximum pain possible on the mainland in case of a “forced reintegration”. They are not even bothering with conscription anymore: after this year the requirement will drop from two years of actual service to 4 months of training.
*@Eric, it looks to me as if Taiwan is, sooner or later, going to reach an “accomodation” with Beijing. As you say it can no longer defend itself from a Mainland take over and the US today falls far short of being able to do anything about it if this should happen. It looks pretty inevitable to me.
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