Q: Why would FATCA unravel if China doesn’t sign an IGA with the U.S.?
FATCA could, ultimately, unravel if China rejects the IGA because FATCA’s primary strength would come from all governments around the world forcing their financial institutions to become compliant with it.
Should the country which looks set to be the world’s dominant economic super power in a matter of decades rebuff FATCA, the project would be compromised and could, in the end, fail as such a stance would, many experts agree, prompt other countries to do the same.
Q: Why is China playing hardball with the U.S. over FATCA?
Read more here.
I enjoy reading Nigel Green’s columns but I wonder what facts prompt him to the conclusions he comes to. Nothing he has said here is much different than what we all hope for yet I still don’t see anything (yet) that really indicates a push in the direction of FATCA imploding. Other than to wonder why so many of the “50” have yet to sign, in spite of what we heard from Treasury’s rep a while ago.
Maybe it’s just fair game to put out ideas that put a dent in the non-ending presumption that FATCA is inevitable?
Will tweet this link to the long list tomorrow, very sleepy. Thanks for posting this!
So now we look to China to stand up for freedom in the face of US restrictions. That’s a measure of just how far both nations have travelled (in opposite directions) over the past few decades.
I sincerely hope the Chinese do not succumb to FATCA, as there really is no reason for them to at all. Given the incredible amount of US debt (i.e. bonds) held by the Chinese, the USA is definitely in no position to make demands of any kind. On the contrary, the USA should come to the realization that the Chinese will increasingly define the rules of the game as time goes on. China should set a precedent now with a resounding NO to FATCA.
So far, only 5 signed IGAs, per the latest updates on the Treasury web site. These still require these Countries legislative approval..
http://1.usa.gov/ZawsRC
This is a complete list of signed FATCA agreements between the United States and other countries:
Switzerland (2-14-2013)
Ireland (1-23-2013)
Mexico (11-19-2012)
Denmark(11-19-2012)
United Kingdom (9-12-2012)
This is a complete list of joint FATCA statements between the United States and other countries:
Joint Communiqué on the Occasion of the Publication of the Model Agreement (7-25-2012)
Japan (6-21-2012)
Switzerland (6-21-2012)
France, Germany, Italy, Spain, UK (2-7-2012)
Dear China,
As holders of > $1 trillion of US debt and guardians of a market with > 1 billion potential consumers of US goods, you are in a unique position of leverage over the US. You probably also view with great disdain the efforts by the US to impose unilateral, extraterritorial legislation on your banking system which would increase the cost of banking services for your citizens. Perhaps I could take a moment to encourage you tell the US that you will no longer purchase US debt securities, or, better yet, will sell your existing holding of US debt securities unless the US repeals FATCA.
Xie xie ni
Xuě rónghuā
@Edelweiss, I hope so too!!!
Today’s Frankfurter Allgemeine Zeitung reports that the German government is about to initial an IGA with the IRS.
The short article appears on page 14 (in the business section). My translation:
CUSTOMER DATA FOR THE FISC IN AMERICA
BERLIN, 21. February. In the future, Germany will be delivering information about the bank accounts and brokerage assets of its citizens to the tax authorities in the United States. The treaty concerning the “Foreign Account Tax Compliance Act” (Fatca) is practically final. According to reports in government circles on Thursday “the initialing of Fatca is imminent”. Initialing fixes the negotiated text of the agreement which, under international law principles, precedes binding ratification. The treaty is deemed explosive because it binds foreign banks to act as agents of America’s tax authorities for the purpose of collecting money from American’s living abroad. As the (German) Federal Finance Ministry emphasized in the middle of last year by way of justifying the negotiations, the United States in exchange will agree to provide Germany with tax relevant information.
Thanks for your report on the status of FATCA in Germany from the FAZ. I searched Handelsblatt, Wirtschaftwoche and Süddeutsche Zeitung today and there is no recent mention of FATCA other than articles on the signing of the IGA in Switzerland. Will keep an eye open for updates as time permits.
@Innocente – I’ve posted this on the FATCA Discussion Thread already, but here you go: http://www.bundesfinanzministerium.de/Content/DE/Pressemitteilungen/Finanzpolitik/2013/02/2013-02-22-PM16.html
I have to admit that I’m pretty skeptical in this, though it would be very interesting if China were to say no to FATCA.
I just keep running this phrase in my head. ‘Owe someone $500 and it’s your problem. Owe someone $500 million and it’s their problem.’
Meanwhile, what of those that have already signed an IGA?
If China were to say no, then who’s to say that they won’t find themselves listed as a ‘state sponsor of terror’ at some point? With hunger for a control, denial towards their debt, and with no shame in the face of hubris, it wouldn’t surprise me if the US did something to stir up trouble somehow.
One can only wait and see.
@Todunstuer
There have been many similar articles in Canada saying a US Canada IGA is right around the corner. Every time one comes out a flurry of angry emails is sent to the relevant government officials and the agreement seems to get kicked further into the long grass. Betting on an IGA later rather than sooner up to now seems to have been a pretty successful bet. If you go to another part of the site you will see that several participants have received feedback from MPs such as Carolyn Bennett as recently as yesterday indicating they intend to vote against a US Canada FATCA IGA ratification.
In contradictory news:
http://www.risk.net/operational-risk-and-regulation/news/2249902/germany-in-no-hurry-to-sign-its-fatca-iga-expert-says
Germany in no hurry to sign its Fatca IGA, expert says
“Governments tend to worry about the POLITICAL aspects of their actions,” says Andrew Watters, London-based director and tax specialist at law firm Thomas Eggar. “Germany received a lot of internal criticism that they were being too kind to tax evaders over their move to sign an agreement with Switzerland.”
Angela Foyle, a tax and financial services specialist at consultancy BDO in London, agrees that there may be national concerns at play for Germany where IGAs are concerned.
“The message with respect to Germany is a little unclear,” she says. “I understood that Germany have yet to sign their IGA owing to ‘national and international delays’ rather than specific problems with the text, but there has been some suggestion that unless certain fears were allayed then they might still operate – at least initially – under the IRS [and full Fatca] regulations.”
“It’s not over until the FATCA Lady Sings”
@notamused
Thanks for the link.
Die Welt has an article published this morning indicating that its sources advise that an IGA is to be signed.
http://www.welt.de/print/die_welt/wirtschaft/article113821334/Deutschland-vor-Abkommen-mit-USA.html
I am thinking that Germany’s intention to sign an IGA with the US may be more symbolic, as a first step to automatic exchange of taxpayer bank account information with European countries, than of real value to it. Generally, Steinbrück and others in the German government have been pressing for an automatic data exchange with other European countries, e.g., Switzerland, Luxembourg, for at least several years.
Also, since Germany (and all other countries in the world minus one) use resident-based taxation, the indicia that US banks would search for might be a German address. Residence, not nationality, of the account holder is relevant for Germany’s tax system.
@USCitizenAbroad
My thoughts exactly.
The Chinese Government has no global aspirations, their main goal is to stay in power. The current situation where they are an export driven economy serves its purpose wonderfully, by keeping all the little Chinese people happy and occupied, and allowing them to accrue some meager savings to buy an iPhone. The only government that has global aspirations is that of the United States and the only reason they have this aspiration is again to keep Americans happy and occupied so we don’t wise up and throw all of them out. Outside of China the only area they care about is their immediate region, that’s why the tiff over the Senkaku Islands is such a huge deal for them.
China (the Government) doesn’t care about you, it doesn’t care about “taking down” the US (even if you do,) and it doesn’t care about American tax evasion (which would be why the FATCA deal would be a no-brainer,) it cares about the 1.3 billion Chinese people who would react rather poorly even violently should their lifestyles all of the sudden take a downturn. They will do what it takes to stay in power, by keeping the Chinese people complacent, fat, and happy and that’s about it.
“If you go to another part of the site you will see that several participants have received feedback from MPs such as Carolyn Bennett as recently as yesterday indicating they intend to vote against a US Canada FATCA IGA ratification.”
@ Tim
I think you are referring to the response I received from Carolyn Bennett — http://isaacbrocksociety.ca/2013/02/16/email-blitz/ — but I’m not entirely sure her reply would translate into a vote against a FATCA/IGA and even if it did there is that dreaded Conservative majority to contend with. The reply certainly expresses her concern about the issue but sometimes there is a disconnect between concern and vote. I’m not even sure there will be a vote. Maybe Harper will just do the Canadian equivalent of an Executive Order, if there is such a thing. Maybe Harper will tack it into another omnibus bill like FATCA was tucked into HIRE in the USA. I hope you can reassure us that a FATCA/IGA will actually be debated and voted in the House of Commons. I really don’t know how all that works. If a FATCA/IGA is approved by Parliament I hope we can then muster a class action lawsuit afterwards as the only subset of Canadians who would have detailed financial information being sent to the CRA and then on from there to a foreign entity.
@WhoaIt’sSteve
Welcome back …. I thought we weren’t going to hear from you again, but always welcome your perspective, even when I don’t agree with it… 🙂 Although I don’t find much to fault with what you say about China, other than some quibbles around the edges which aren’t worth the effort. Keep commenting, if you have the time.
Em (or anyone else who may know), I am a bit confused on how the IGA passing in parliament gets around the Charter in terms of privacy issues. Say the IGA is agreed on and the Conservatives have the votes that doesn’t negate the issue, does it? And since the CRA, supposedly, already shares info with the IRS on interest bearing accounts – what’s the purpose of the IGA anyway? Fishing?
As far as China goes, they’d be idiots to give in and it’s beginning to look more and more like countries such as Germany, and maybe even Canada, are content to kick the IGA can down the road for a while, waiting and seeing. With everything that’s going on, and given the fact that the US has blinked and pushed back deadlines and start dates already, why would any country be in a hurry to sign up if they could stall?
@ “a”
Honestly I don’t know how they get around the privacy laws either … unless they try to say FATCA reporting is just a bit more information than what they already send. Of course it is NOT a bit more, it is a LOT more. They might try to pass this off as merely tweaking the existing tax treaty rather than gutting privacy rights for one subset of Canadians which is what it really is. Canada is a vital station stop for the FATCA train and it should be the place to derail it, along with China which seems to be warning the FATCA train to stay away.
@ a and Em
It’s my understanding that they will have to pass legislation to change the privacy laws.
GERMAN BANKS: FATCA IS JUST PEACHY KEEN
From Business section (page 20) of the Frankfurter Allgemeine Zeitung, 25 Feb. 2013:
“BANKS OK WITH TAX TREATY”
mas/pwe. BERLIN/WASHINGTON, 24 February. The German banking industry regards the tax treaty with the US as acceptable. “We believe that using a bilateral treaty to prevent tax evasion by American citizens using foreign investments is the right thing to do and we emphatically endorse it,” said Michael Kemmer, chief business manager of the Banking Federation. Under the treaty implementing the “Foreign Account Tax Compliance Act” (Fatca) banks will report information about Americans’ accounts to the German Federal Central Tax Office (Bundeszentralamt für Steuern) which will then provide the data to the US. In return, Germany will receive information about interest and dividend income of German citizens in the US. The treaty, which has not yet been published, was initialed last week.
“By a targeted narrowing of the scope of Fatca’s application the administrative costs that the banks will have to deal with can be reduced to an acceptable level”, said Kemmer. The German Finance Ministry was able to negotiate some relief for the German banking industry from the original US demands. These will apply to small financial institutions with a local customer base. Institutions like the Bundesbank, the Federal Finance Agency and the Financial Market Stability Fund and government developement banks will not be affected. The state banks (Landesbankeen), however, must abide by the new rules. Sources within the Federal Finance Ministry say that the contents [of the treaty] closely tracks the model treaty that America concluded with five countries. To date, the US has concluded similar agreements with Denmark, Ireland, Mexico, the UK, and Switzerland and is negotiating with more than 50 countries.
@todundsteuer
I have been looking for that article on line. Was the English title, or was it in German? Do you have a German title I can do a search for it, or maybe you happen to know the link? Thnx
yeah, there’s tens of thousands of Americans in North Dakota, Rhode Island, and California that are stashing their Money in Germany——–to avoid taxes.
“In return, Germany will receive information about interest and dividend income of German citizens in the US.”
Should we read that as “German citizens living in the US”. Or “German residents having US bank accounts”.
Information exchange should be based on residency. i.e it’s fine to report interests/dividends of non residents. Without non residents spelled out, it opens the door for other countries to implement citizenship based taxation, which they might do since the whole west is going broke and looking at ways to pay down their debt.