I have been waiting for someone else to pull this important FATCA development out of the comments made earlier in the day and make a blog posting of it. I guess it might as well be me.
Accounting Today’s Michael Cohn has reported on this quoted knee slapper for why FATCA is being delayed:
Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury Deputy Assistant Secretary for International Tax Affairs Robert B. Stack in a statement. “The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.
Note who this Robert B Stack is….. Frequent and regular readers of IBS should know who he is.
He was the one that was trotted out for public testimony at recent EU Parliament Public hearings on FATCA. If you did not hear his comments or read them, you should at least listen to what he has to say about the Administration’s efforts to provide reciprocity for those they are coercing into signing IGAs. Here is the last part of his answer to questions toward the end of the hearing.
And finally on reciprocity, we would simply point out that under our IGAs that are reciprocal, the IRS agrees to exchange information on interest, dividends and other income that is already collect, which is substantial and in some cases more extensive than what has to be, uh, reported under FATCA.
The US recognizes the importance of reaching equivalent levels of exchange, uh, under all our law, that we are getting from other jurisdictions. And the administration has included in its budget proposal a provision that would permit U.S. Financial Institutions to make such equivalent exchanges.
Under the U.S. political system, uh, different from some Parliamentary systems, we need to work that through Congress but we are um, we are committed to doing that. Once we’ve done that, to go to the question of beneficial ownership in Delaware, once we have equivalent levels of exchange, we would expect our own financial institutions would be required to look through entities and report on individuals just as non U.S. institutions are required to do under our IGA.
Notice that he doesn’t mention anything about Congress recognizing the need for equivalent levels of FATCA exchange, or that this was the intention of Congress when they passed FATCA. But nevermind, Treasury and the Administration plan, by ‘hook or by crook’ , to impose a DATCA on all U.S. Financial Institutions (USFIs), on that he is quite clear! Time will tell if he gets his wish, but Representative Posey thinks not and is calling for a moratorium on FATCA enforcement and FATCA IGAs as we should know from the July 4th message of cheer that was posted by @Calagary411
As for the delay, frankly I think that the June 23rd letter to Treasury from SIFMA and American Bankers calling for FATCA to delayed had more to do with this than anything else.
Number 1 on the list was…
1. Further relief is necessary regarding the January 1, 2014 effective date in order to avoid over-withholding due to delays in the promulgation of essential guidance.
7. Foreign branches of U.S. banks should not be subject to two parallel regimes. (§1.1471-2(a)(2)(v)) (IE FATCA rules and FATCA IGA rules)
You can read all of their other reasons for delaying here
Bottom line: Coming on the heels of ObamaCare regulation delays, the IRS is overwhelmed with a regulatory mess of their own making, and this fiasco is not ready for primetime yet.
Moral of the story: it’s really, really difficult to get an international tax regime going on a unilateral basis. There is a story in this about the difference in making a unilateral rule first, and then repeatedly changing it to fix all the problems that inevitably arise, versus sitting around in international networks trying to make sure the rule will work first, before trying to implement it internationally. Empirical project for international law buffs!
Finally, I would be remiss if I didn’t draw your attention to one other part of the Accounting Today story. This shows to me that Michael Cohn is trying to be more than a Treasury scribe and regurgitate their press releases verbatim. I have been critical of him in the past for that, and I do think he is being more careful now to give balance to his reporting. It never hurts when the contra view gets the last word in an article. 🙂
This is not surprising,” Jim Jatra, who runs the anti-FATCA Web site RepealFATCA.com, wrote to Accounting Today. “Treasury’s timetable for getting IGAs signed is far behind schedule. Treasury’s explanation for the delay—‘the groundswell of international interest in FATCA’ —‘is absurd on its face. If there was such a ‘groundswell,’ why would they need another six months to try to push everybody into IGAs? This is just a poor excuse for the fact that there isn’t a groundswell, that on the IGA front they’re behind where they expected to be at the end of 2012. ‘Every additional country we bring on board’—or fail to have brought on board yet—means they have to contemplate trying to enforce FATCA directly, of which Treasury is even more terrified of than the FFIs are. Congressman Bill Posey’s July 1 letter to Secretary Lew knocking the legs out from under promises of ‘reciprocal’ information from the US removed what little credibility this policy had. The Department should heed Mr. Posey’s advice to suspend FATCA’s enforcement and negotiation of further IGAs until this misguided law can be overhauled, or better yet, repealed.