March 27, 2013
Washington, DC
James George Jatras for RepealFATCA.com
In an important development in Washington, today Michael S. Edwards, Vice President and Chief Counsel, World Council of Credit Unions, called for repeal of the Foreign Account Tax Compliance Act (FATCA). Among the points cited by Edwards, the boomeranging costs of FATCA from foreign institutions to domestic U.S. entities like credit unions:
FATCA compliance for U.S. credit unions is also not likely to be easy or inexpensive though the IRS delayed most compliance requirements for U.S. institutions to Jan. 1, 2017, from its originally proposed Jan. 1, 2014, compliance date. U.S. credit unions are included in the IRS rule’s definition of “withholding agent” and therefore will be required beginning in 2017 to perform due diligence and 30% tax withholding on overseas payments of not-yet-taxed U.S.-sourced “passive” interest and investment income that is being routed to financial institutions overseas that are not FATCA compliant. “Passive income” includes interest and dividends paid on credit union share accounts and banks accounts, as well as the taxable proceeds from sales of real property or other U.S.-based investments.
He also cites FATCA’s meager support in Congress and the need for more action to build opposition:
Last year a group of U.S. senators including Rand Paul (R-KY), Mike Lee (R-UT), and Saxby Chambliss (R-GA) wrote then Treasury Secretary Timothy Geithner to express disapproval of how the administration was implementing FATCA. Their letter also requested detailed information on how FATCA would impact U.S. banks and credit unions, including its estimated compliance costs, as well as information on whether FATCA would compromise the financial privacy of U.S. citizens. Larger scale opposition to FATCA in Congress, however, has not yet materialized.
FATCA does not seem to have very many supporters in Congress, but it is already the law of the land and will affect U.S. credit unions eventually unless Congress acts. World Council of Credit Unions and the Credit Union National Association are working to gain traction in Congress for such repeal, but at this juncture, repeal is far from guaranteed in a divided Congress that is concerned about deficit spending. While we will continue to advocate repealing FATCA and its unnecessary compliance burdens, we will also be pursuing regulatory relief with the Treasury and other policymakers.
Edwards’ call comes as FATCA is experiencing significant hurdles with getting foreign governments to sign so-called “intergovernmental agreements” (IGAs) to implement this law. Among the countries either refusing to sign or dragging their feet are China and Russia, and even in Switzerland a “nonreciprocal” IGA is running into parliamentary obstacles to approval.
RepealFATCA.com applauds WCCU’s position and calls on other impacted industry to engage directly in effecting FATCA’s repeal before the worst aspects of this misguided law go into effect. The time to get behind the repeal push is now!
James George Jatras
+1.202.375.1007
@Just Me
Thanks for posting this. I have long argued that the only way we’ll get Americans to back off on FATCA is to expose the looming compliance (DATCA compliance of course) costs for US banks and credit unions. What us “furriners” think is irrelevant to most of those Congresscritters, but they do listen to the lobby groups that complain vociferously about the damage done to their interests — and the banking lobby is very powerful. It’s also the best way to get some media coverage.
I keep hoping that the snail’s pace of IGA signings is rooted in the reciprocity issue. A lot of nations are waiting to see just how serious the US is about reciprocity. My fervent hope is that when the Obama Administration gets something in front of Congress to codify that reciprocity, it will get overwhelmingly defeated. It’s OK to violate privacy rights for people in other countries, but don’t you dare suggest we do it to ourselves.
I’ve asked my banking source about whether or not CUCC (Credit Union Central of Canada) will support the WCCU position, but I don”t expect to hear back until sometime next week. I’d be surprised if they are not on board, since I’m pretty sure they are members of the World group.
There are two representative of Credit Union Central of Canada(and Central 1 Credit Union) on the WCOCU Board of Directors:
http://www.woccu.org/about/leadership/bod
http://www.woccu.org/about/leadership/bod?area=&id=37
http://www.woccu.org/about/leadership/bod?area=&id=59
@Arrow
Re “My fervent hope is that when the Obama Administration gets something in front of Congress to codify that reciprocity, it will get overwhelmingly defeated.” With any luck, it won’t even get to a vote to get defeated. Again, there are some backroom goings-on I hope will break into daylight soon, but if we can get the right ” No way, Jose’ ” public commitments from Congress on new legislative authority toward real “reciprocity,” we can jam that down the throats of prospective IGA signers and maybe even some that already have signed. You can see from much of the foreign media, also from HMRC, etc., that our IGA “partners” believe (or at least pretend to) that Treasury’s promise of reciprocity (under the “treaty” with the US — another deception) can be taken to the bank, so to speak. If we can rub their nose publicly in the fact that there will be no reciprocity, it may make it hard for them to proceed, no matter how much some (CBA?) would like to capitulate.
badger had some good comments about Canadian Credit Unions starting here…
March 28, 2013 at 10:09 am
Important to note that the article
http://www.cucentral.ca/SitePages/Home.aspx
‘FATCA Details Slowly Emerging’, from ‘Connections’ newsletter, is dated March 15, 2013
and then there is this more recent one in the CU Central newsletter ‘Connections’; from March 21, 2013
‘Good News/Bad News: Other Taxation Measures’
by Gary Rogers, Vice President, Financial Policy,
Credit Union Central of Canada
One mentions constitutional issues, and the next one dwells on an anticipated IGA.
It is hard to know how to interpret the difference in tone between the two articles, which are dated a week apart.
In terms of reciprocity the rumor is the President’s Budget being released late during the week April 8th will make some type of request in this regard to Congress(Patrick Temple West of Reuters has already reported this). It is unknown whether Congress will even respond.
Time to bring back the cartoon that Badger found awhile back …
http://thebilzerianreport.com/fatca-explained/fatca-cartoon-2/
The pain the US FIs would feel from true reciprocity (that darn DATCA) is a direct offshoot of the USA shooting itself in the foot with FATCA.
@Just Me
“It is hard to know how to interpret the difference in tone between the two articles, which are dated a week apart.”
And written by the same guy I think. The credit unions are sorely conflicted by this. Because they have no assets in the US to be imperiled by giving Uncle Sam the finger they would love to do exactly that — but they can’t do it by themselves and are hoping that Ottawa will do it for them.
On the other hand, they are realistic enough to recognize that the big banks do have US assets that might be hit, and that the CBA is pushing hard for an IGA because they believe an IGA is better than no IGA. Given all that, the credit unions need to be at the table the ensure that the IGA gives them the best protection they can possibly have.
This is not an easy file for anyone, and that includes the credit unions. Remember that the author of these missives is Gary Rogers — he’s the same guy I interviewed for my BCBusiness piece who described FATCA as “Yankee Imperialism.” My suspicion is that if ever these CUCC guys are unleashed, they’ll tear a strip off this process and Jim Flaherty’s ears will burn.
@Arrow….
Thanks for your additional comments and insights on the CCU, and I never did say, thanks for that great article in the Vancouver Sun. You do good work…
A bit off topic, but the latest news writes that it looks like Swiss life is going while the going is still good, selling its US business that deals with US clients:
http://www.handelsblatt.com/unternehmen/versicherungen/lebensversicherer-swiss-life-erwaegt-verkauf-von-us-geschaeft/8000204.html
Intriguing, thank you every body!
institutional costs of FATCA compliance will be passed onto clients and customers.
Financial institutions will increase account fees to cover these costs.
US importers will need to cover the costs of an effective 30% tariff by raising the prices of goods.
All major US exporters have global supply chains (aircraft, automobile, military equipment …) these added costs are a tax on exports ( similar to the old Canadian MST) which will make US products less competitive and costing more domestic manufacturing jobs.
@All
Re “This may suggest that part of the delay in reaching an IGA is extracting some concessions from the American government that will provide some benefit to Canada” — or much more likely, they are NOT getting much in the way of concessions, and Washington is waiting for Ottawa to cave under desperate pressure from CBA. After all, a bad IGA is better than no IGA, right?
Wrong. An IGA, even a “good” one is a Pyrrhic victory at best. Whatever the supposed carve-outs for certain parts of industry, those carve-outs stand only at the whim of the US Treasury Department and in effect can be revoked at any time. If CBA, CUCC, etc., spent one percent of the effort (and money) they put into trying to get an IGA or beginning FATCA compliance, it would be gone by now.
We actually have the date the President’s budget is being released, April 10th. Of course according to rumor(Patrick Temple-West and others) this document will contain a request to Congress to impose a formal FATCA level of reciprocity on US banks. I can’t you though for those who are unaware of the machinations of US politics how UNIMPORTANT the President’s budget is. In fact both houses of Congress have already passed their own budget plans. The key which James is working on is to at least get some members of Congress when this request is released to basically for the cameras say No way Jose. Having said that even in the absence of any Congressional acknowledge pro or con the odds of Congress acting on a particular tax law change request made by the Treasury in the budget are incredibly low.
This is the link you want to check out on April 10th
http://www.treasury.gov/resource-center/tax-policy/Pages/general_explanation.aspx
@Jim Jatras
“If CBA, CUCC, etc., spent one percent of the effort (and money) they put into trying to get an IGA or beginning FATCA compliance, it would be gone by now.”
You may recall that I wrote a letter to the CBA suggesting this very thing and that they get in touch with you. I heard back from them and they said they had in fact been in communication with you. Would you mind sharing this/these communications with us at Brock? Was their response a “no thanks”, “maybe later”,…?
@Jim Jatras, you wrote “if we can get the right ” No way, Jose’ ” public commitments from Congress on new legislative authority toward real “reciprocity,” we can jam that down the throats of prospective IGA signers and maybe even some that already have signed.”
I hate to be pessimistic, but would that really change things? From all we read so far, given the residential based taxation of all the other contries, reciprocity on nationals residing in the US is not of that interesting for foreign countries. Some are requiring it as a matter or principle, but it seems that what forces other countries to sign an IGA is not the presence or absence of reciprocity. It is the 30% withdrawal club used to coerce them to sign, and the pressure from their banks not wanting that 30% withdrawal.
Nothing has really been done to prove that the US has in fact the legal international right to impose this sanction if foreign countries refuse to play. Can they impose it on some countries and not others (for example it is unlikely they impose it on China). And no one had had the courage to call this nonsense and propose equivalent level of tariffs if they refuse to sign an IGA and are indeed withdrawn those 30%.
Chris writes “And no one had had the courage to call this nonsense and propose equivalent level of tariffs if they refuse to sign an IGA and are indeed withdrawn those 30%.”
I’ve been wondering about this as well. If the US were to unilaterally start withholding 30% from US sourced money, would Canada be able to go to the WTO for approval of countervailing measures? If so, if *all* countries did this, the US would hardly be in a position to move forward with FATCA, no? The US is playing a game of divide and conquer; for that to work, the various countries have to play along.
Under NAFTA Canada could but I am note sure there is anything under the WTO that other countries could do.
@All
Re CBA and “I heard back from them and they said they had in fact been in communication with you. Would you mind sharing this/these communications with us at Brock? Was their response a “no thanks”, “maybe later”,…?” Yes, I talked with them shortly after that, the heard me out, but clearly they knew better. They indicated they had “lobbyied” Congress, by which they meant they had talked to Senators and Congressmen, told them of CBA’s concerns and – predictably – got nowhere. My efforts to explain that concerns of foreign banks were of little use with Congress, that we needed a broad-based education program on how FATCA harms Americans (etc., etc., I won’t repeat my ususal song here) fell on deaf ears. In effect, their tone was one of people who are convinced they’re hardheaded realists, they already know everything, they need to make the best deal they can, end of story. There was no “no thanks,” no “maybe later,” just “good talking with you.” BTW, they’re still on my maling list, so they see all my bulletins from repealfatca.com (and no doubt will see this too). So they can’t say they’re ignorant of another possible approach, they’d just have convinced themselves they’re right, I’m wrong. I have no doubt that CBA is a, if not the, leading force pushing for a Canada-US IGA.
Re whether killing reciprocity would really change things, versus simple fear of the 30% withholding, the short answer is: let’s find out. Let’s kill reciprocity and force the foreign governments to face the fact they won’t get anything like a real “partnership” from the US. Certainly, no one should ever underestimate the spinelessness of foreign governments when confronted by demands from omnipotent Washington, and of the industry that is pushing them toward IGAs. That said, so many governments have planted their flag publicly on reciprocity, there has to be a reason for it. My guess: it’s a fig leaf for their craven capitulation to the US (and fully aware of how sick and tired of it so many their citizens are getting), and without it it may be hard for them to go forward, even with the bankers pushing. Take the Swiss as an example: SVP, Greens, and Social Democrats balked at ratifying the non-reciprocal IGA and want only an IGA that’s reciprocal. (It’s correctly pointed out, because non-US governments don’t have citizen-based taxation, reciprocity wouldn’t provide much useful information anyway for their own tax enforcement. So it has to be mostly a matter of principle to explain why it’s not a surrender of sovereignty (“See, we’re partners ….”), as well as the costs of enforcement FATCA.) But if that mask is ripped off? Again, let’s see.
As far as the legality of the 30% withholding — OF COURSE it’s not legal except as the most crude illustration of legal positivism, which amounts to little more than might makes right: “We can give you an order and punish you for disobeying, so it’s ipso facto legal.” How does a US statute create a legal obligaton for a foreign company outside the US? It doesn’t. So the withholding is simply a taking, confiscation, expropriation, reprisal, — pick your favorite. As the Athenians said to the Delians, “The strong do as they will, the weak suffer what they must.” But, duh, China isn’t so weak. Russia isn’t so weak. And, duh, we aren’t as strong as we pretend. OF COURSE there are remedies. To start with, under WTO on its face FATCA is a discriminatory trade barrier, as it ONLY imposes a duty (and costs) specifically on non-US institutions but not on American ones. That’s only the start of what would be a slew of lawsuites, trade actions, and if need be reprisals, by foreign governments and firms who had funds withheld if the US were mad enough to try to enforce FATCA without the IGAs.
Here’s another perspective on the behind-the-scenes collaboration between Canadian banks, the Canadian Bankers Association and the Government of Canada.
Yesterday, on a lark, I walked-in to a local branch of the Bank of Montreal to ask about BMO’s plans for FATCA. Of course neither the reception thingy nor any of the tellers had any idea what I was talking about so they called-out a junior manager to deal with my request. He had no idea either but said he would look-it-up right away. I waited about five minutes outside his office when he reappeared with this document, which he kindly printed-out and gave to me:
BMO FATCA Statement, October 22, 2012
Here’s an excerpt:
What is BMO doing in response to FATCA?
BMO has established an enterprise-wide team to implement the necessary process, system and organizational changes that will be required once FATCA comes into effect and has been working with the Canadian Bankers Association, applicable governmental departments and other Canadian banks to help shape and understand the IGA.
So, it is comforting to learn that at least one person at BMO must know what FATCA is and is actively engaged with the CBA and GOC “to help shape and understand the IGA”. Hardly sitting on the sidelines just waiting for something to happen, are they?
Of course, none of these gatekeepers of Canada’s economic well-being would have considered for even a nanosecond to invite any other potential stakeholders to the party, such as even one of the million or so U.S. Persons living in Canada who face much greater personal threats from FATCA than any Bay Street suit (except, perhaps, for the ones who may soon find-out that they are in fact accidental Americans – wouldn’t that be a delicious irony?)
I am convinced that even if there were TEN million U.S. Persons living in Canada, they would still be thrown under the bus long before Canada’s own “too big to fail” banking cabal would be made to feel any real discomfort over FATCA.
Thanks for more evidence of the writing on the wall, Deckard. It is more and more apparent who and what is important in our societies.
What is to be said but what is in this important piece posted by USCitizenAbroad: When law becomes a substitute for morality
Well, are there any affected “accidental American” good lawyers in Canada — some prepared to work pro bono on Charter challenges and class-action suits, as aptly suggested in your previous comment?
@Deckhard, re BMO’s FATCAT statement dated October 2012; …”and has been working with the Canadian Bankers Association, applicable governmental departments and other Canadian banks to help shape and understand the IGA.”…
So interesting how the ‘public’ notice and request for comments that appeared on the Finance Department’s site was AFTER BMO and the CBA was already working with OUR government departments. Apparently, Canadian citizens and account holders aren’t ‘stakeholders’, and aren’t important enough to inform, and consult, though we’ll all pay for FATCA implementation via our bank fees, our federal taxes to support the CRA and other federal costs, and as ‘taxable persons’, with our legal local accounts at risk, our privacy and our peace of mind.
Why don’t we picket and boycott the CBA members?
Even if the credit unions are compelled to give in too, at least they tried. The CBA is rejigging things to benefit themselves and their shareholders, while using the deposits and assets of their customers.
I say we punish the CBA by pulling anything we still have in CBA member banks whereever possible and holding only credit union accounts instead. The CBA never did run any Canadian media ads to alert the Canadian public, and have made no efforts to alert their account holders and urge them to contact the Harper government against FATCA. They are collaborators and enablers of the worst sort – by cutting the public out of the loop, and by pushing the IGA – which they know is wrong and unconstitutional. They’ll let the Canadian public and government wrestle with a Charter challenge after the fact, and burden taxpayers with the resulting legal costs.
I’m not letting them near my funds, and I’ll urge my non-US family members to switch in protest.
badger, do you know which credit unions are going to roll over and play with FATCA or not? If so, how can I find out who the credit unions are that will give the US of A the big finger?
@Deckard
Great work! “CONFIDENTIAL INTERNAL USE ONLY” So, from whose prying eyes are they seeking to hide?
I’m sure the intrepid Fourth Estate will jump right on this! Listen . . . [chrirrrup, chirrrup: hear crickets]
Still, is there someone in the media would care? Parliament? This is a smoking gun that the big banks, CBA, and the Government are in a closed-door collusion to railroad an IGA through without meddling from the public.
(BTW, how does “Bank of Montreal/Banque de Montreal” come out “BMO”? Can’t these people spell?)
Meanwhile, the CBA web site has not updated its FATCA “Information for Clients” page since July of 2012, which means it does not reference the final FATCA regs recently issued by the IRS:
http://www.cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients
At this point they might as well wait until an IGA is announced in a few weeks. At least they’re providing fair warning to would-be recalcitrant account holders that “If you do not complete IRS Form W-9 or provide your consent to disclose information to the IRS, your financial institution maybe required to withhold a tax of 30% on any U.S. source payments that you receive and send this money to the IRS. Also, your financial institution may refuse to open an account or may be required to close existing accounts.”
Oh Canada, we hardly knew ya’.