New videos have been posted of the GMU seminar on FATCA with Jesse Eggert and Jim Jatras.
http://www.georgemasonjicl.org/fall-2012-symposium-videos/
http://www.youtube.com/watch?v=agk7-xqywHc&feature=player_embedded
http://www.youtube.com/watch?v=kyI6RHjg4A8&feature=player_embedded
A couple of thoughts:
1. I did not think the representitive of the German government was all that impressive. In fact I am beggining to think there is real cultural divide on FATCA between Canada and Europe.
2. The audio in part 1 with Jim Jatras and Jesse Eggert unfortionately is a little soft. However, the moderator actually I think did an okay job.
3. Jesse Eggert of Treasury actually seemed to admit the idea of repealing FATCA was not inconcievable as long as “something else” replaced it. In his mind though nothing else had or has been suggested to replace it.
@ Tim
I’ll check out the volume on the Second Panel video and if it’s better than the First I’ll watch it later. I agree with your assessment and now I’m thinking it probably isn’t a bad idea to get a hint of the mindset that is working against us. However, you can imagine what I was shouting back at Herr Peter Deblon.
*If Peter Doblin was a Canadian civil servant he would be facing the “punishment and discipline” of the Prime Minister’s Office(PMO) described in the video below even in the context of the current Canadian government not necessarily opposing an IGA.
Jesse Eggert of Treasury actually seemed to admit the idea of repealing FATCA was not inconcievable as long as “something else” replaced it. In his mind though nothing else had or has been suggested to replace it.
I don’t think FATCA or anything similar should exist, but as I’ve written before, if the US really insists on enforcing its tax laws in other countries, it could replace FATCA with something similar to the EU savings directive. It’s an agreement where countries report to each other the income from bank accounts received by residents of the other country. It has the following characteristics:
1. The income from interest is reported, because that’s what’s actually taxed. The account balance is not reported.
2. The agreement is completely voluntary for countries outside the EU, and there is no penalty if they don’t want to comply. Unlike the US, the EU did not impose its will on the world unilaterally, and it sought agreements only with alleged tax havens, because it didn’t think it was practical or worthwhile to seek agreements with the whole world. Still, a large number of alleged tax havens outside the EU accepted the agreement and already implement it: Switzerland, Andorra, Monaco, Liechtenstein, San Marino, Lebanon, Isle of Man, Guernsey, Jersey, Cayman Islands, Turks and Caicos Islands, British Virgin Islands, Anguilla, Montserrat, and others. Many of these are British territories and I suppose the UK was able to convince them to comply.
3. If a country, inside or outside the EU, objects to reporting income because it would violate its bank secrecy laws, it may alternatively withhold tax on the income and send it to the country of residence of the account holders, without reporting their identity. The sending country is allowed to keep part of the tax too. In this case, the account holder may avoid the withholding tax by signing a waiver allowing the bank to disclose the income on the account. Account holders may also take credit for the withholding tax, potentially resulting in a refund, if they report the corresponding income on their tax return. The withholding tax is currently 35%.
Advantages of the EU savings directive over FATCA:
1. It provides the actual information relevant for taxes, which is income. FATCA requires reporting account balance, which doesn’t make much sense. (Are the designers of FATCA interested in FBAR penalties or actual taxes?)
2. It is easy to identify the residence of account holders, through their address on file. Citizenship is irrelevant.
3. Transfers between financial institutions are not affected.
4. It respects the sovereignty of other countries by requiring their consent.
5. It respects the laws of other countries by allowing an alternative withholding tax instead of reporting information when this would be illegal.
6. It is already implemented by all EU countries and many alleged tax havens.
Now I understand why FBAR and FATCA ask for account balances. Dick Harvey explained how a US business owner may direct customers to deposit payments in a foreign account and not report the income to the US, so the entire balance of the foreign account would represent income, from US sources, on which tax was not paid. In this case, it would make sense to apply a penalty to the balance of the account. Assuming that the balance is untaxed income, an FBAR penalty of 50% would be equivalent to something like a tax of 35% plus a 40% penalty on the unpaid tax.
The problem with this reasoning is that a foreign bank account is not needed to hide income. US banks do not report account balances to the IRS either, only the income from interest. A business owner can therefore simply receive payments in a regular US account, report a lower income, and the IRS will not know that the real income was higher. In fact, Nina Olson said that the vast majority of tax evasion in the US is done this way, small business and self-employed people simply report lower earnings. Nothing to do with foreign bank accounts. So, by Dick Harvey’s logic, the US government should actually require US banks to report account balances to the IRS, but I don’t see anyone proposing that.
And of course, the other problem is that if the balance of the foreign account is really savings from income that was indeed already taxed in the past, the penalty represent nothing but a draconian extortion.
I don’t know how Dick Harvey sleeps at night.
@ bubblebustin
I skipped the keynote speaker video because I just didn’t want to listen to him. His debate with Jackie Bugnion was more than I wanted to hear from him. From your comment it sounds like he didn’t want to listen much when he was in Switzerland. He must have just gone there for the chocolate.
http://isaacbrocksociety.ca/2012/06/25/acas-jackie-bugnion-and-j-richard-harvey-debate-fatca-for-two-night-this-week/
@Em
He made some comment about how in FATCA’s early development he had expressed concerns about how it would impact US Persons abroad. I’d like to see evidence of that somewhere.