Nigel Green is blogging again on FATCA impacts. Usually, I just put his blogs up on the ‘Ask your FATCA questions’ thread to maintain records of articles coming out.
However, thought I would give this one headline billing, as he is asking the question from an Homeland CEO, “Should the US force FATCA on the world? I’d love to hear your comments?”
So, let’s help supply some comments, shall we?
Note: I see he has picked up on James Jatras interview with iExpats.
@Tim @bubblebustin @anyotherBrockers…
Thanks for giving Nigel some comment feed back. We need more. 🙂
FATCA is a large, clumsy, crude and unilateral attempt by the United States to cudgel, bluster and otherwise persuade the world to subscribe to the US American totalitarian assumption that the financial affairs of every denizen of the planet should be an open book to whatever sovereign entity claims the right to tax that person.
Over the years since the Civil War the citizens of the United States, with no historical experience – yet – of a totalitarian regime have been steadily surrendering power at every level: individual, familial, community and state to a centralized, Federal government.
The citizens of the US have been especially careless of their rights to privacy in the realm of financial and economic affairs. It began with the gradual introduction and imposition of electronic tax withholding and reporting on investment income in the early 60’s and then took a giant leap forward in 1970 with the massive wholesale surrender of financial privacy to the Federal government through passage of the “Bank Secrecy Act”.
The co-option of US financial institutions as the long arm of the IRS was part and parcel of that development.
The early 21st century has witnessed efforts – some more successful than others – by the democratically elected representatives of the US to expand the intrusion of the federal government into nearly every nook and cranny of economic intercourse; chiefly, by imposing reporting requirements on just about any individual or business that makes a commercial purchase of goods or services. Partly out of economic necessity the IRS has recently begun the process of co-opting the entire tax return preparation “industry” in the US and bending them to its will as the unpaid “deputies” of the tax collector.
It is perfectly natural that governments aspire to ominiscience and that is why citizens must always be on their guard and be prepared to challenge. But technological developments have abetted this megalomaniacal urge on the part of the US government to attain financial omniscience. There is serious doubt about the future of cash and the barter-based – and private – economy that cash enables.
Against this backdrop FATCA should be viewed not as an end in itself but rather a very large step in the direction of spreading the notion of the omniscient state throughout the world.
In the big picture, the US insistance on citizenship based taxation is simply a curiosity – but a potentially important one. If the US did not engage in the pointless stupidity of citizenship based taxation FATCA would have remained entirely invisible within the US and the political opposition to FATCA in and out of the US – weak as it is – would likely not have existed at all.
For those of you who are understandably focussed on the collateral damage inflicted by citizenship based taxation on US persons residing outside the US, I suggest that you consider looking for allies in the battle against US citizenship based taxation in a very unlikely place:
FATCA PROponents.
For those of you with the interest and patience to contemplate that possibility and who would like a clearer picture of the truly huge stakes for individual liberty and privacy that FATCA has put into play, I commend to your attention the recently published article by Itai Grinberg in the UCLA Law Review:
http://www.uclalawreview.org/pdf/60-2-1.pdf
Itai is a very intelligent scholar who has only recently left the US Treasury Department to return to academia. He is young and idealistic and he is deeply – and primarily – concerned about the ability of the nation state to force the winners of a globalized economy to contribute to the commonwealth of whatever nation in which they reside.
The question in my mind that I cannot yet answer is: assuming that the goal Mr. Grinberg espouses is good, is it worth the price in the loss of individual liberty and privacy?
When reading his article, ask yourself: would Mr. Grinberg be amenable to backing an end to the tomfoolery of citizenship-based taxation if in so doing it enhanced the possibility that FATCA or something like it became a universal model for world tax administration?
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*The following Itaw Grinberg’s footnote 240
240
A broadly multilateral system would be unlikely to identify nonresident citizens. The United States is almost alone globally in taxing bona fide nonresident citizens as if they were residents. Indeed, bona fide nonresident U.S. citizens working outside the United States have in some instances encountered serious difficulties banking in the countries in which they reside as a result of FATCA.
Such persons rightfully note that their bank accounts in the country where they reside are not offshore accounts and that it is inappropriate for regulatory rules to make it difficult for them to maintain residence country financial accounts.
For one account, see Letter From Marylouise Serrato, Exec. Dir. & Jackie Bugnion, Dir., Am. Citizens Abroad, to Timothy F. Geithner, Sec’y, U.S. Dep’t of the Treasury, Manal Corwin, Deputy Assistant Sec’y, U.S. Dep’t of the Treasury, Douglas Shulman, Comm’r, IRS Steve Musher, Assoc. Chief Counsel (Int’l), IRS (Aug. 31, 2011),
available at http://www.deloitte.com/assets/DcomUnitedStates/Local%20Assets/Documents/Tax/us_tax_ACA_2011_18533_1_090811.pdf.
@Todundsteuer
You have certainly nailed the essence of what is wrong with FATCA, down to its very core…
Please copy and paste it over at nigel’s blog, as it provides a holistic view of evolution that is happening, or put another way, it points out to the frog that the water is warming up, and about to boil. Very well said. P.S. if you don’t have time or inclination, may I?
and interesting suggestion about the Itai piece and reaching out to FATCA Proponents and making alliances. I assume you saw that Jack Townsend’ had posted it on his blog. Very Few comments: http://federaltaxcrimes.blogspot.co.nz/2013/01/new-article-on-emerging-consensus-for.html
@Tim
Thanks for digging out that footnote 240. So, Itai gets it! The problem with these guys, even when they can see the negative consequences of their proposals, they still advocate for them inspite of it. It is not enough to have a footnote, and expect the likes of a Carl Levin or Max Baucus to take note! They don’t read the bills they vote for, let alone some scholarly article!
FATCA, Americas’ new toxic tax act, is in trouble
We have a friend in Nigel Green. He has put up another FATCA blog. I would encourage as many brockers who can to comment.
Here is what I posted…
JUST ME says:
January 12, 2013 at 1:45 am
Gosh I hope that is correct. I don’t want to experience the “Karl Rove election night shock” as a pundit that was absolutely certain that Romney had won! We need more media attention and some serious lobbying effort to be sure that the “FATCA IGA Pig can’t fly”
The opposition, the FATCAnatics, are a determined lot, with almost religious fervor for their mission. I, in no way underestimate their single minded myopic focus. Combined with the OECD they have a global mission, a GATCA if you wish. FATCA is the ‘tip of the spear’ in their War on Offshore Tax Evasion (WOOTE), consequences be damned. You are right, it will not solve the problem, any more than the War on Drugs, after 50 years, has solved America’s drug consumption.
What is hard to understand is why the resentment of all the FFIs of the world against FATCA is only being channeled into compliance spending and not other risk avoidance strategies. Shedding Americans from their account lists isn’t enough. That might feel good, in a get even sort of way, but it really doesn’t solve their problem. Treasury is really working hard to make the non participating foreign financial institutions (NPFFI) position in the global economy untenable. However, that only works if there is mass compliance capitulation by FFIs and Governments around the globe.
All the FFIs hate FATCA. US Banks Hate FATCA. They all know FATCA is totally wrong in the unilateral way it is being conducted, and yet they meekly comply. Why? Because the FATCA Compliance Complex (FCC) with a vested interest in selling compliance products told them they had to? Fear of that 30% withholding? Probably. What is certain is this. Their meek quiescence, is assuring they get what they hate. They make it so.
I am puzzled. I thought what the financial “masters of the Universe” did, was make hedging decisions to diversify risk. Yet with FATCA, because of ‘group think’ they all believe in the FCC marketing message, YOU MUST COMPLY. Or maybe because of fear of reputational risk of being ‘broad-brushed’ as in favor of tax evasion, they collectively are putting all their eggs into FATCA Compliance basket.
Why are they not diversifying even a small portion of the total spend into a lobbying effort? In America, lobbying, as much as we complain about it, has a good track record of a better return on investment, (ROI) then the way FFIs are pouring money down a one way rat hole.
I wished someone could explain that to me, as I truly do not get it.
If this was a new hot CDO they would should certainly be buying a CDS against total loss, or at lest they should have learned that lesson from the financial crisis. They should have a similar effort against FATCA Cost and Exposure. Maybe AIG is selling that derivative now, and I don’t know what it is.
If I was a board member of a FFI that was willing pouring money into the FATCA compliance bottomless pit without ANY effort at lobbying to get the damn thing repealed, I would have some hard questions for the management. Just writing a letters to Treasury beseeching them for relief around the edges in a comment period is NOT enough! Rather, waste of time, comes to mind.
So, IMHO, if I were the CEO, I would be asking my compliance team, what portion of the total spend is directed to a DC centered lobbying effort and what portion is going into due diligence to comply if absolutely forced to. If they have to pay those 30 silver coins equivalent of 30% withholding to dob in U.S. Persons residing around the globe, then at least spend 1 coin on an opposite bet. Even if it was just 3% of the billions the industry is going to waste, for no return, they could have considerable clout for very meager exposure. In the meantime I would drag my feet with as little spending on compliance as possible, as delay is a good strategy too.
However, it appears that right now, they are all lined up on the same side of the bet. Doesn’t that give anyone pause to consider what is happening? Is this the same group that pre 2007 ALL thought CDOs were a sure bet, and forgot to cover their exposure with a CDS? Read the ‘BIG Short’, and don’t go 100% long on FATCA yet!
This message is spreading…
Foreign Banks Rejoice: Overreaching U.S. Tax Law in Trouble
Nigel keeps it up… He definitely should be inducted into the IBS Hall of Fame…
How you will end up paying the price of America’s controversial new tax act