See below: “U.S. Treasury to miss deadline on tax crackdown – sources” (Reuters)
So much for the FATCA juggernaut – another delay! This also signals IGAs are not falling into place as fast as they need to. Another reason CANADA must not rush to sign an IGA.
Impacted interests (FFS, foreign governments) need to stop preemtive surrender and wake up to the fact that Treasury is shooting blanks — and STOP negotiating IGAs with Washington. Instead, they need to support FATCA repeal in DC!
Media need to stop acting as bulletin boards for government releases and see that there’s a big story here: FATCA IS IN TROUBLE.
Exclusive: U.S. Treasury to miss deadline on tax crackdown – sources
WASHINGTON (Reuters) – The Treasury Department will miss a year-end deadline to publish final rules for a new global tax enforcement regime targeting the offshore assets of U.S. taxpayers, sources familiar with the timing said on Wednesday.
The rules represent one of the last implementation steps for the U.S. Foreign Account Tax Compliance Act, or FATCA, which is scheduled to take effect in 2014.
The accounting industry sources, who asked not to be named, said the rules are on track to be released in January.
A spokeswoman for the Treasury Department on Tuesday would not confirm whether the year-end deadline will be met.
“We are still working to issue the final regulations and they will be released soon,” the spokeswoman told Reuters.
Treasury has already missed one deadline for the publishing the final rules. It came and went in September.
FATCA was enacted in 2010 after an outcry over a Swiss banking scandal that revealed U.S. taxpayers had hidden millions of dollars in assets overseas from the Internal Revenue Service.
The law requires foreign financial institutions to tell the tax-collecting IRS about Americans’ offshore accounts worth more than $50,000.
International businesses ranging from Western Union Co to BlackRock Inc are waiting anxiously to see the rules so they can figure out how to comply with the law.
Delays mean businesses will have less time to prepare for compliance. Multinational firms have said they need at least 12 months to prepare for FATCA’s 2014 start date.
“It is critically important that final FATCA regulations are issued as soon as possible,” said Barbara Angus, a principal at Big Four accounting firm Ernst & Young LLP.
Treasury efforts on the rules may have been slowed by a number of government-to-government FATCA information-sharing deals it started pursuing earlier this year, tax experts said.
The United States has completed FATCA deals with the UK, Denmark and Mexico. Switzerland and Spain also have “initialed” agreements with Treasury.
Meanwhile, negotiations are continuing for deals with at least 50 other countries, according to the Treasury Department.
These deals represent a shift in FATCA implementation. While not envisioned as part of the 2010 law, the agreements are seen as a more practical way to implement the law.
Rather than forcing all foreign financial institutions to deal directly with the IRS, in some cases the agreements will allow the banks and funds to report information about American accountholders through their home governments to the IRS.
(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh)
*I have been suspecting this announcement all week.
Excellent, keep up the push-back, holding our countries to be responsible for the people they are supposed to represent and protect. Thank you for letting us know about this, Jim Jatras.
This is almost funny. I heard from someone close to the Canadian IGA negotiations just a couple of days ago that they were told the rules would be out by the end of the year. Reason being: Treasury wants to give a full 12 months notice before compliance bites. My guy thought they’d drop it on Christmas Eve (deeply-rooted cynicism abounds in this process, I get the sense that none of the soldiers in the trenches want to be doing this and that’s true on both sides of the border.)
Will be interesting to see whose “sources” are right on this.
I tend to think the article is probably correct however, if the hold off too long the will quite possibly have to push back the start date until 2015 at which point the FATCA regime will take on an incredible amount of water and possibly capsize. They are going to have to make some type of announcement regarding grandfathering dates soon. Also remember last year they originally had a year end deadline for the proposed rules but they were delayed until Febuarary.
Thanks. Hey, maybe the story will turn out to be inaccurate, but I don’t think so.
I agree with you I don’t like Patrick Temple West(largely because he is an IRS stooge) but I suspect he is correct. I suspect it was a basically a leak from the IRS/Treasury to the FATCA compliance complex to take the holidays off. Remember for those of you north of the border that the IRS will have massive IT and computer issues if the “fiscal cliff” is not resolved by the new year. Perhaps as much as the IRS wants FATCA they had no chance but to pull all of their operations staff away from it to focus on what to do if their is no fiscal cliff deal by Jan 1.
*The issue with giving full 12 months notice though is very real in my opinion. I don’t think FATCA could survive another 12 month delay. Six month delay maybe? It is also my interpretation of the IRM that where there is an outstanding congressional inquiry(from Dave Reichert) that inquiry should be responded to prior to the final rules being published. As of now there is no known response back to Dave Reichert. I suppose they could do it the same day the final rules are to be released but I have a feeling a response to Reichert will come first.
What you’re saying makes sense. But in a perverse way, releasing the rules before year end might slow down the Canadian rush to an IGA. The Canadian FFIs have strongly urged Ottawa to get at least an 18-month lead time on implementation before they sign an IGA — if Treasury put out the rules before year-end and confirmed a 12 month implementation there might be a strong reaction from the banks. If Treasury delays it until 2015, that takes the immediate pressure off the banks and gives them more breathing room — and they might support an IGA with the rules to come.
Hard to know what’s going to happen here — but I do know Ottawa has been told that there are significant charter problems with an IGA, all revolving around discrimination on “national or ethnic origin,” and that an IGA might get the banks off the hook but not the government. In other words, to implement an IGA that singles out US Persons/Citizens residing in Canada, Ottawa has to get around the Charter (notwithstanding clause?). This came in a letter from one of the country’s senior constitutional experts; a letter written a couple of weeks ago in response to that Finance Department call for submissions.
This constitutional issue could be far more significant than anything Treasury does or doesn’t do. Would Flaherty/Harper want to override the Charter to send personal financial data on Canadians to the IRS? That would create a firestorm. I’m workin’ on this — keep your fingers crossed.
Do you have a link to the “letter from one of the country’s senior constitutional experts”?
*Well if they release after January 1 in my opinion for whatever its worth they will have to either delay the start until January 1 2015 instead of January 1 2014(becuase their will be less than twelve months pre January 1 2014) or perhaps July 1 2014. The July 1 2014 scenario I consider unlikely because the IRS has already announced that FATCA requirements will only be progressively phased in at the start of each year. There are actually other FATCA related deadlines after January 1 2014 for things such as manual and electronic searches starting on Jan 1 2015 and Jan 1 2016 respectively. So my guess is the FATCA start date wouldn’t be moved to mid year it will either be Jan 1 2014 or Jan 1 2015 if the regs are delayed until after Jan 1 2013.
*Just a Canadian
No I don’t but I have a feeling I know who it is because I was the one many many months ago who got him involved with FATCA.
Just a Canadian
Letter not public yet (and I don’t have it, or believe me it would be public) — he’s apparently in the process of setting up a meeting with Finance to discuss his advice. I was told second-hand what the gist of the piece was. Apparently the only info Ottawa can collect and send to the IRS, without violating charter rights, is info on Canadian accounts held by US residents. I’m sure Carl Levin won’t think that’s enough.
Also — I’m told that the IGA negotiations are extremely tough slogging because the Americans (remember they are trying to ink 50 of these things) are loathe to make any country-specific modifications — they are insisting on the UK version unaltered. That also might work in our favour.
To Arrow’s previous point about about even the US acknowledging the need to give a full 12 month implementation period after releasing the rules that doesn’t mean in praticality if the final rules come out on Jan 15 2013 that implementation will be delayed until Jan 15 2014. In reality it means that implementation will be delayed until Jan 1 2015 or possibly July 1 2014. Now clearly if they release the rules on Christmas Eve and say they are still sticking with Jan 1 2014 as the start date that might put the Canadian banks backs up against the wall in terms of IGA negotiations where they will have no choice but to fight given the CBA claims to be absolutely determined to have 18 months for implementation.
There are a couple of big picture issues the IRS/Treasury promised Congress essentially to have the final regs out by Jan 1 AND IGA’s with major countries including Canada. It looks very unlikely that both will happen and perhaps not even either. At some point some one in DC is going to start asking serious questions on this whole thing.
Has the federal government ever invoked the notwithstanding clause before?
Also remember that the US/UK IGA contains a “most favored nation” clause. If Canada or anybody else gets a special deal then the UK will also get the deal.
“Treasury efforts on the rules may have been slowed by a number of government-to-government FATCA information-sharing deals it started pursuing earlier this year, tax experts said.”
FATCA’s devil has always been in the details. Someone please drive a stake through its heart soon.
Nope never. Alberta and Quebec did once each. Notwithstanding clause is absolute poison in the context of Canadian politics.
There is one tidbit I know which is the one phone conversation people working on these issues on both sides of the border are dreading is for the PMO National Security Advisor at Langevin Block to pick up the phone to the White House National Security Advisor to setup a date and time for Prime Minister Harper and President Obama to discuss FATCA. The conversation has not occured yet and many in both governments are trying desperately to avoid it but might be coming sooner than I thought given Arrow’s latest comments. This is not just a Harper thing Obama and his White House Staff(Officially known as the Executive Office of the President) would really rather not discuss FATCA either.
The Federal Government has NOT invoked the “notwithstanding clause”. The idea of their doing it send private info the IRS is hilarious.
I can’t believe even a strongly pro-American Canadian government would try a notwithstanding Charter bypass on something like this. The constitutional understanding in this country has always been that Charter bypasses are ONLY for really serious, generally province-sensitive issues (e.g. language laws in Quebec). Doing a favour for a bunch of FATCowboys in DC isn’t remotely in that league, the precedents it would set and the firestorm I think it would raise politically in this country are things that not even our current rather arrogant PM or his cabinet would seriously contemplate. I could be wrong, but I very much doubt it. I think it’s far more likely our govt will invite the US to go pound sand on this than try a notwithstanding motion in Parliament. I can think of few things more likely to unite every single opposition MP against the govt on this, and the payback in byelections and the next federal one are interesting, to say the least, to contemplate. Can you say “Kim Campbell?”
Now you’re all just getting my hopes up. Next you’ll be saying that the world won’t be ending tomorrow…
Didn’t see Tim’s reply to Suki until I posted my reply to everyone.
Good one, Tim. “Poison” is it, in a single word. Not gonna happen. Fuggeddaboutit.
Given the fiscal cliff and gun control discussions in DC, I can well imagine this thing is suddenly looking like poison to lots of folks in the White House too. Or at least something they wish would go away and die a natural death somewhere. Or even an unnatural death. I’m sure lots of folks in DC can think of much better ways of spending time and soon-to-dwindle-bigtime budgets and staff than trying to negotiate 50 stupid IGAs about something that a growing number of accountants and economists are saying publicly would be poison to the US too and not remotely worth the bother it could create. Fiscal cliff and gun control are going to be a lot more complicated to negotiate through Congress or with the American people than FATCA, and both issues have a lot more impact and importance to most Americans than FATCA. Especially since most people in Congress who voted for FATCA didn’t even read the damn bill and are going to be apalled at what they voted for once they read it and think about it for a few minutes.
My best guess, anyway, but what do I know? I’m probably too rational for this.
*Thanks for all the answers…
Here’s hoping FATCA will implode…
… and further to a point Arrow made above re the constitutional opinion:
I doubt anyone on this website has any serious problems with Canada providing account information to IRS on accounts held in Canada by US residents. I sure don’t. In fact, AFAIK Canada has been doing that already anyway, at least I believe the banks have been. I don’t care; that isn’t the problem from the perspective of anyone who lives and works outside the US and especially those of us who know we’re never, ever going back there to live, work or study. Nothing wrong about THAT info sharing under our Charter, nor with me, nor I suspect with anyone or barely anyone else here. But I doubt we need an IGA for THAT. If that’s all the IGA will do, and they think they need it, fine. Just don’t let it go one millimetre past that, and make damn sure the IGA has a clause that will prevent that if someone tries to sneak it in later as an amendment.
Frankly, does the United States care if they give FFI less than 12 months notification? I frankly don’t think they will. And I frankly don’t think that the US cares about our Charter of Rights and Freedoms, nor does the current government in power. The sad thing about it is that none of the existing parties that I see that are in a position to be in power in Canada (neither the Liberals, the NDP, nor the Conservatives) care about Canada’s sovereignty.
Schubert1975. Actually, I do have a problem with it. Privacy laws were meant to be a protection against “account prying”. In any case, it doesn’t matter where the person resides. If Canadian banks are bound by the privacy laws, then the reporting issue becomes a slippery slope. If the FFI are going to report on US residing citizens with accounts in foreign banks bound by foreign privacy laws, then where do they stop? You can’t arbitrarily say “We’ll report your citizens who are residing in your country but we won’t give up those who are residing in our country”. Privacy laws are privacy laws and are bound by the country’s sovereign legislation. It is a tricky step here to go around our privacy laws and say that one group of investors/account holders are not protected by law, because then it opens the door a crack to betray the rest down the road.
I guess one way to solve the constitutional problem would be to send everybodies banking information to the US. If everyone is treated equally then nobody is discriminated against.
(Please note it am NOT advocating this solution)