April 1, 2013
Washington, DC
By James Jatras
Writing today in the American Banker, e-money researcher and crypto economist Jon Matonis gets dead right what a lot of the conventional “wisdom” gets wrong: FATCA (the “Foreign Account Tax Compliance Act”), is far from a “done deal”:
“Cited as a hindrance to foreign investment that would ultimately dampen U.S. economic growth and threaten American jobs, the FATCA penalties for noncompliance provide a strong incentive for overseas investors to avoid U.S. depository institutions altogether. Tax Management International Journal cites 11 reasons why FATCA must be repealed. Reason number one is ‘the height of arrogance.’
“It is either the reciprocity angle or the cascade effect of China’s reluctance that has the greatest potential to derail FATCA.”
Matonis picks up what a lot of other professionals – especially the legion of compliance vendors, the only likely beneficiaries of a “revenue enhancer” that would certainly lose more money than it “recovers” – have completely missed. Foreign governments increasingly are likely to demand from the U.S.real, not token, “reciprocity” in information exchange, but they won’t get it. Some particular problems loom in Asia with respect to “intergovernmental agreements” (IGAs) essential to FATCA’s survival:
James Jatras of the Repeal FATCA campaign claims that Hong Kong, like the People’s Republic of China, is not even on the list of 50 countries the Treasury claims to be negotiating with.
There will probably be so few U.S. citizens holding bank accounts in China that the cost of implementing FATCA outweighs the benefit to China’s financial institutions. Also, the Chinese taxpayers with U.S. bank accounts appear to be of minimal interest to the Chinese government, according to Lisa Smith of iExpats.com.
In addition, while FATCA’s 30 percent withholding penalty (more properly: confiscation, expropriation, seizure, sanction – take your pick) on “recalcitrant” foreign institutions (i.e., those failing to comply with an edict they have no legal or moral duty to obey) has hung like the Sword of Damocles over the entire FATCA discussion, it is beginning to sink in that the costs of complying with FATCA are simply unacceptable:
“Although experts in the FATCA preparation business tend to agree that moving forward with expensive FATCA compliance plans is the prudent and logical step to be taking now, a comprehensive and worldwide FATCA roll-out is far from a foregone conclusion. For those financial institutions and their shareholders offended by the overreaching legislation and lack of respect for mutual sovereignty, the cost savings alone may start to make FATCA’s non-compliance penalties look tolerable.”
If domestic and foreign institutions were to put even one percent of the time and resources they have been pouring into preparing to comply with FATCA, or convincing non-U.S. governments to sign onto IGAs, FATCA likely would be gone already. The time to get behind the repeal push is now!
James George Jatras
+1.202.375.1007
Visit www.RepealFATCA.com for more information on “ the worst law most Americans have never heard of”
Ministry of Finance of the Republic of China (Taiw : Joint Press Release
Press Releases Statements(News)
Joint Press Release
The Financial Supervisory Commission (FSC) and the Ministry of Finance (MOF) today jointly announced that both agencies and the U.S. Department of Treasury have reached, under the auspices of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office in the United States (TECRO), the consensus to pursue an agreement to facilitate the implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).
To cope with issues resulting from FATCA, an interagency task force including the FSC, the MOF, the Ministry of Justice and the Ministry of Economic Affairs has been formed under the guidance of the Executive Yuan. Consultations, under the auspices of AIT and TECRO, between the task force and the U.S. Department of Treasury have been undertaken several times aiming at reducing the compliance cost of local financial institutions. In addition, efforts have been dedicated to assisting local financial institutions to comply with all the domestic legal requirements and to protecting the depositors as well as the investors.
The Taiwan authorities are supportive of the underlying goals of FATCA, and are interested in exploring a framework for mutual cooperation to facilitate the implementation of FATCA. Both sides affirm their willingness to continue their consultations and actively seek to finalize the signing of an agreement.
(Information provided by Ms. Pi-Lien Ding, Department of International Fiscal Affairs, Tel: 02-2322-8150.)
As I say:
http://isaacbrocksociety.ca/2013/04/01/irs-tinkers-again-with-final-fatca-regulations/comment-page-1/#comment-255549
Just cc-ing what I wrote on Maplesandbox when they posted it yesterday:
Most of what Jon Matonis writes is a regurgitation of what we all know already, but he did say something interesting: “It is either the reciprocity angle or the cascade effect of China’s reluctance that has the greatest potential to derail FATCA.” With the current lack of impetus Congress seems to have in repealing FATCA, repeal will most likely happen later when other countries retaliate against the US for not holding up their end of their IGA agreements. Should Canada take the disingenuous step of signing an IGA believing it’s potentially the best way to defeat FATCA? NO. Should Canada hope to create a “cascade effect” by not signing? Canada should respond to the US’s extortionate behaviour by telling them to go take a flying f*ck and tell the US that we will hit them with every method of retaliation at our disposal should the US go through with FATCA. Instead we have a bunch of pussies who are letting a bunch of greedy scaredy-fatcats (the banks) push them into betraying 1 M Canadian residents and their families. Until repeal becomes real, the FATCA train barrels along full steam ahead, no matter how many IGA’s are signed or how many countries are reluctant to sign them.
Let’s make that “betraying ALL Canadians”.
Allison Christians has a new post up regarding citizenship-based taxation and STEM workers and it has references to Victoria’s latest post on her blog …
http://taxpol.blogspot.ch/2013/04/to-understand-why-citizenship-based.html
http://thefranco-americanflophouse.blogspot.ca/
“… we’re going to make these foreign-born, foreign-raised, foreign-educated, now high-skilled, highly-paid workers a permanent part of the American taxpaying public …”
Casinos have a term for people such as STEM workers. Now what is it? Oh yes … SUCKERS!
NOTE: The STEM Jobs Act allows employers to fill their talent needs with foreign workers who have advanced degrees in STEM so that they can create jobs and grow the US economy. STEM stands for Science, Technology, Engineering and Mathematics.