Received via email from ACA:
American Citizens Abroad (ACA) Welcomes Treasury Department’s Latest Step on FATCA
In its ongoing efforts to implement the Foreign Account Tax Compliance Act (FATCA), the U.S. Treasury Department has just released an updated version of the Model Intergovernmental Agreement (IGA), on November 14th. FATCA requires foreign financial institutions to report the accounts of American citizens and those considered US persons, to the U.S. government, or risk incurring a withholding tax of 30% on all U.S. transactions. This new version of the Intergovernmental Agreement contains provisions that require a Foreign Financial Institution (FFI) that wishes to take advantage of certain favorable provisions to avoid policies or practices that discriminate against opening or maintaining accounts for Americans residing in the foreign country covered by the IGA. This “loosener” is aimed at small financial institutions with essentially a local client base.
Although American Citizens Abroad (ACA) continues to have many concerns about the negative consequence of the FATCA legislation for the US economy, the organization welcomes this step addressing the problem of Americans living abroad being denied banking services because of FATCA. This is a clear indication that ACA advocacy, along with that of other overseas organizations, is having an effect, and the concerns of ACA’s members are being addressed. ACA will continue to work with the Treasury Department and the IRS to develop a range of practical solutions.
“Americans abroad have been seriously disadvantaged by the implementation of the new FATCA rules, even before they go into effect, because banks all over the world now perceive American clients as too risky,” said MaryLouise Serrato, Executive Director of ACA. “Foreign banks have been closing Americans’ accounts and turning away Americans wanting to open a new account. We want to do everything possible to avoid this happening, and these new provisions are a step in the right direction,” she continued.
ACA is a non-profit, non-partisan, volunteer association whose mission is to defend the rights of Americans living overseas.
Contact:
Marylouise Serrato
Washington, DC
202 322 8441
If memory serves, USC clients were being dumped by financial institutions which didn’t want to participate in FATCA and its associated administrative headaches – I’m not sure what problem this purports to solve.
The assault of the United States against other sovereign nations continues. Its violation of the property rights of citizens abroad. It’s double taxation. Its abuse at the borders continues. It continues its raising of taxes on “unearned” income. It hasn’t stopped sending erroneous bills to Americans abroad.
I see a lot of positive to celebrate here too.
Interesting. Making a law that foreign institutions cannot discriminate against US persons, while outside of the USA, while following mandatory US laws which demand that they must discriminate against US citizens while in their territory.
Well said Mark Twain!
Is this the school yard bully saying that if you don’t play with their friend they are going to beat you up?
US arrogance knows no bounds. They’re dictating to foreign countries and banks about not closing US client accounts and under what conditions or FFI size parameters? After starting all this with FATCA in the first place? This is starting to sound like a Monty Python skit on LSD.
Not something worth celebrating IMO.
A very small piece of chocolate.
Nothing for curing the real disease for expats: citizenship based taxation with nothing in return.
So what happens every time the IRS decides to tweak the “model” IGA? Does this automatically supersede the IGA’s that have already been negotiated with each participating country? Is it completely unilateral or does the so-called “partner” country actually get a chance to respond and, you know, renegotiate? I think we already know the answer to that one.
Even Orwell couldn’t anticipate this manifestation of global blind and willing bureaucratic madness. So much complexity, so much squandered goodwill, so much needless expense – all for nothing. If there’s an upside to this “concession”, I fail to see it. Increasingly, ACA seems sadly inclined to take the credit for the tiniest bone the IRS cynically throws over the wall. To me they’re like the abused wife who’s grateful that her husband only beat her once instead of twice on the weekend.
“This new version of the Intergovernmental Agreement contains provisions
that require a Foreign Financial Institution (FFI) that wishes to take
advantage of certain favorable provisions to avoid policies or practices
that discriminate against opening or maintaining accounts for Americans
residing in the foreign country covered by the IGA.”
What is this supposed to mean? So the agreement is between two governments. Yet this provision applies to the FFI? Is this to mean that private sector banks can’t refuse to deal with US citizens if their government signs the IGA? Must the government pass a law prohibiting a bank in the private sector from denying banking services to US persons? If my interpretation is correct this now confirms in a formal way that the local government is actually working directly for the IRS and imposing IRS procedures on the local bank. If so, this is even worse than the original.
There is only one reasonable response to FATCA. No compliance, no agreements, nothing at all! I am still amazed that there is a single country on the face of the earth that is willing to to along with this.
Sooner or later there will be a rebellion. The rebellion will be less costly to all if it comes now.
Important to note that the UK-US IGA contains a most favoured nation clause (Article 7) which means that if a better deal is negotiated with another country, the UK will have the benefit of that deal. This is referred to in a British Bankers Association response to a call for comments from the UK government.
http://bsmlegal.com/PDFs/BBA_Response_to_the_HMRC_Consultation_document_%27Implementing_the_UK-US_FATCA_Agreemen.pdf
FATCAConsistency: The UK – US IGA, the final FATCA Regulations and IGAs concluded with other jurisdictions must be consistent to prevent unnecessary challenges to financial institutions (FIs) operating internationally or with ambitions to do so in the future. The BBA hopes that the implementation of the UK – US IGA can serve as a template for FATCA implementation, to ensure that the obligations imposed on
FIs are consistent across jurisdictions. If this does not occur, there is a significant risk that diverse practices will emerge creating uncertainty for FIs, generating unnecessary costs, and compromising the policy goals of FATCA by requiring alternative reporting and due diligence standards.
Doesn’t this solve the problem of banks discriminating against Americans based upon their citizenship or US tax status? We already know domestically the US has some of the strongest and most comprehensive civil rights laws, this little step just helps Americans abroad to achieve a more equal status in other countries, why are you all grousing about it?
@WhoaIt’sSteve
The fact that they aren’t the US’s banks doesn’t mean anything to you?
@Bubble No why would it? Here, everyone is protected from national origin discrimination, why wouldn’t it be equal in these other Western nations?
And it’s circular argument time again!
@Deckard I don’t see what’s circular about it? It’s shocking to me as an American that these other nations will criticize the United States for all kinds of things (obesity, knowledge of geography, gun control, “hate” speech,) yet when it comes to something basic and fundamental like civil rights it appears we’re far more liberal and progressive than most of them. Leveling the field for Americans abroad can only be a good thing from my perspective.
@WhoaIt’sSteve
I think the idea here is that the US simply has no business telling foreign banks what they may and may not do. I believe I read in another thread, this will apply to small local banks with local customers. So ineffective say for Credit Suisse, UBS, etc. The “civil rights” aspect originates with the US law, wouldn’t you say?
@Whoa It’s Steve
“…when it comes to something basic and fundamental like civil rights it appears we’re far more liberal and progressive than most of them. Leveling the field for Americans abroad can only be a good thing from my perspective.”
Two observations:
1. If the U.S. was as liberal and progressive as it would like to believe it is, then it would have joined the rest of the world decades ago by legislating citizenship-based taxation out of existence. The fact that it hasn’t is the fundamental reason why we are here chatting on this web site in the first place.
2. Americans enjoy levelling the field on a regular basis – pretty much every time they invade another country. It is no doubt a very good thing from their perspective because they appear to be addicted to it.
ACA = supplicant who celebrates small concessions. Like emaciated prisoner in dungeon elated by one dry bread crust happening not to be mouldy.
Freedom = NOT being an American citizen abroad (aka extraterritorial owned lock stock and hiney by the abUSive Uncle).
Coming back to the ACA meeting: I must have missed something. Concretely, can somedy please explain what exactly was gained? that “local banks” can be exempted from FATCA?
@WhoaIt’sSteve: Banks aren’t discriminating against Americans abroad because they are Americans, but because it is too expensive for them (the banks) to comply with FATCA. There hasn’t been a problem before FATCA. This has nothing to do with civil rights.
I can hardly see anything positive about the USG threatening foreign banks who don’t want to have anything to do with USPs because of the USGs policies. Besides that, how could one prove that those banks refused those customers based on their citizenship? Banks can refuse customers for any number of reasons, so if they provide any explanation at all for refusal, they can just choose another reason. Such a non-discriminatory policy is unenforceable and hardly worth the paper it’s printed on.
The anti-discrimination clause appears in the section called “Deemed Compliant Financial Institutions”. There are two types of Deemed Compliant Financial Institutions – Small Financial Institutions with Local Client Base and Certain Collective Investment Vehicles. I’ve ignored the latter.
You are a Deemed Compliant Financial Institution by virtue of being a Small Financial Institution with Local Client Base if:
1) You are licensed and regulated under the laws of the FATCA partner country
2) You have no fixed place of business outside the FATCA partner country
3) You must not solicit customers outside the FATCA partner country. You can have a website but it can’t indicate that you provide accounts to non-residents of the FATCA partner country or target or solicit US customers
4) You must be required under the tax laws of the FATCA partner country to perform either information reporting or withholding of tax on residents of that FATCA partner country
5) At least 98% of the accounts by value must be held by residents (including entities) of the FATCA partner country
6) Subject to 7) beginning 1 January 2014, you do not maintain accounts for a) any US Person not resident in the FATCA partner country b) a Nonparticipating Financial Institution or c) a Passive NFFE controlled by a US person
7) On or before 1 January 2014 you implement the policies and procedures to detect customers in 6) and either report the accounts or close them
8) For each account held by a non-resident individual or an entity opened prior to the implementation of the customer review procedures, you must review the account and either report it or close it
9) Each related entity must be incorporated in the same FATCA partner country and each entity must comply with each requirement above
10) You must not have policies or practices that discriminate against US persons resident in the country
A very small crumb indeed. The subset of financial institutions that might be able to qualify is extremely small with a limited product set. I don’t see the advantage to qualifying as a Small Financial Institution with Local Client Base because it still requires you to implement the customer review procedures outlined by FATCA and either report or close the accounts of all non-residents or US persons.
The only class of institution not allowed to discriminate against US customers is one that is already prevented from targeting or soliciting US customers with their website.
By limiting the subset of financial institutions that are not allowed to discriminate against US customers, they are endorsing discrimination of US persons by the 99.9% of financial institutions that don’t qualify.
I think this might be a sliver of carrot for the financial institutions where the US government cannot force compliance with the stick of withholding 30% of their US profits. Instead, they create a class of institution where it sounds like there are reduced requirements and encourage them to qualify for this by implementing FATCA customer review and reporting procedures. The sage words of Admiral Ackbar spring to mind.
Bad law begets more bad law. FATCA is wrong. Citizenship based taxation is wrong. How could anyone in their right mind think they could ever exist together?
@whoaitssteve
Do you like FATCA so much so that tweaking it can only make it better?
Perhaps this is old news. There seems to be no doubt that Australia is happily signing up for the fantastic FATCA IGA program.
http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/00332506.htm&page=6&H6&goback=%2Egde_3731046_member_187203789
The Australian Treasury is in discussions with the US Treasury and supports the signing of an inter-governmental agreement (IGA). The ATO view is that the IGA would be a reciprocal arrangement of the collecting and reporting of information.
@WhoaIt’sSteve;
re your comment; “Doesn’t this solve the problem of banks discriminating against Americans
based upon their citizenship or US tax status? We already know
that domestically the US has some of the strongest and most comprehensive
civil rights laws, this little step just helps Americans abroad to
achieve a more equal status in other countries, why are you all grousing
about it?”
We are less than equal in other countries as a direct result of US imposed citizenship based taxation. No other Canadians that I know of here in Canada, are having to prove to another outside/’foreign’ government (ex. the US) that they don’t owe it taxes and that their bank accounts aren’t criminal. Only those here with a US birth, parent, or green card, etc. That is not the doing of our own home government, that is the direct policy of the US. No other Canadian residents or citizens are paying huge sums to file forms annually to satisfy another country’s tax agency. Or are effectively blocked from renouncing unwanted dual citizenship by having to prove 5 years tax compliance – imposed from a government outside where they live and earn and may have been born. No other Canadian resident or citizen will have their legal local post-tax bank accounts automatically reported to a foreign country – based on their parentage or birth location. Only those the US claims – against our will.
The only other country that imposes taxation merely on the basis of inherited or birth citizenship is Eritrea – not anyone’s idea of a champion of civil or human rights.
The non-US banks are doing what they are doing as a result of the US imposition of FATCA, no other reason. US policies and actions are the root cause – which even Richard Harvey – the architect of FATCA acknowledged reluctantly.
It is the US, who threatens to, or effectively is causing the suspension or abridgement of the civil rights we have in our actual and non-US country of residence or birth citizenship by using threats and economic force to cause other countries to consider, or to actively change their privacy and other laws in order to enact FATCA – which is in conflict with our domestic laws, Human Rights charters, Constitutions, etc. The US actively discriminates against those it claims abroad as taxable citizens and against US persons living outside it’s borders – it does not even consider the issues that we face, and in fact imposes a larger tax reporting and penalty burden on our income and local accounts than it does on those living inside the US – even though we usually owe the US no actual taxes. Many of us will never be allowed to vote from abroad though we can be fined incredible amounts and taxed on our non-US property – earned or acquired in the non-US country where we live. The US has caused that to happen and refuses to remedy it. That is effectively serious discrimination based only on our unwanted US citizenship combined with our residence abroad. We benefit not at all, but are penalized much more.
Our only voice is organizations that those abroad have created and run. There is no dedicated US body or department to represent or assist > 6 million of us – though the US insists that we owe the US a tax and reporting debt for our lifetimes – and that of some of our children. The Taxpayer Advocate Olson has urged the IRS to address the serious inequities in services, treatment, etc that are plaguing us – but the IRS refuses. The IRS keeps disingenuously saying that there is ‘no evidence’ for our claims – but refuses to release information that might prove them. It also refuses to look into them.