For a country which has a history of resisting American imperialism, i.e., banning the U.S Nuclear powered Navy from its ports, times have changed.
Today, New Zealand is moving steadily by stealth towards passive acceptance of a FATCA IGA. It gets no media coverage, and has no visible, on the ground, opposition. Nothing concerning the detrimental impacts of FATCA has broken out in public media, and I think it is fair to say, that Kiwis generally have no idea what is happening (not withstanding Osgood, Moby and Pukekonz comments on IBS).
The only thing that gets active and vocal resistance in New Zealand is the Trans Pacific Pact, which is rightfully seen as “not about ‘free trade’, but about corporations subverting national sovereignty!” So, Corporations subversion of NZ sovereignty is a concern, but the U.S. Government doing it via FATCA gets not a mention.
The other issue that incites Kiwi passions, is the KimDotcom illegal spying drama. If you are not familiar with that story, here are 10 pages of search results you can explore. These two issues (KimDotcom and TPP) should cultivate fertile ground for FATCA resistance, but no connection has been made in any media article I have seen.
A while back, the IRD put up notice of FATCA requirements on its website without fanfare. We posted about it here. However, you will be hard pressed to find any media coverage of FATCA. You can do a FATCA search on the New Zealand Herald and come up with nothing. Search on Stuff.co.nz. Only two articles appear, and the last was in May 2012.
So safe to say, that Kiwis are as uninformed about FATCA as homeland Americans.
That said there has been some correspondence via a dual citizen I know, who has been providing input and asking question of the IRD working group who were charged with the task of negotiating with US Treasury the terms of their surrender to the IGA.
Below (with his permission) is the latest response that show the IRD bureaucracy mindset and the frustration of the author. It is followed by the list of questions he originally posed along with the response he has been given:
“I am still in correspondence with Todd McClay, the Minister of Revenue. After he replied to my original letter describing NZ Citizens (deemed US persons) as “US taxpayers habitually resident in New Zealand“, I wrote a lengthy reply stating that was an insult to NZ citizens etc. I also explained the ways in which taxes will be levied (Capital Gains, Self Employment tax, PFIC, Obamacare etc.).
I just received a response and …… more of the same. Here are the relevant paragraphs:
“The remainder of your letter questions whether New Zealand should be entering into an IGA and raises specific concerns regarding how the US tax code will impact on US taxpayers living abroad (including in New Zealand). As I have mentioned previously, an IGA will not alter the tax obligations of US taxpayers. However, an IGA will significantly reduce the compliance costs that New Zealand businesses would otherwise have to incur through the FATCA legislation taking effect. It will also clarify exemptions from FATCA reporting.
Legislation enabling New Zealand financial institutions to comply with their IGA obligations is scheduled to be introduced to Parliament prior to FATCA obligations taking effect. As an interested member of the public, you are welcome to contribute to the select committee process for that bill so that your views are considered by the committee”
So, it’s fairly obvious where this is going here. His continued classification of New Zealand citizens as “US taxpayers habitually resident in New Zealand” makes me very angry, but I may have reached the point of giving up with this guy.”
If there is going to be any resistance to a pro-forma acceptance of FATCA IGA legislation, some of the estimated 60,000 U.S. Persons living in New Zealand will have to wake up from their slumber. Right now, I don’t see any public activism about to break out in New Zealand. There is no plan to raise awareness or slow up the acceptance of what should be unacceptable. The same can be said for Australia. The majority of NZ banks are Australian owned, and while they hated FATCA when passed, they have lobbied hard for the IGA. What they want, they seem to get.
If anyone has any additional insights into any resistance to FATCA in the Pacific, please add your insights here. On the hopeful front, I have not heard that Pitcairn Islands or New Caledonia are rushing to sign a FATCA IGA but as their French or English masters decide, so they will go. I wonder what Fiji, Solomons, Vanuatu, Tonga, Niue and the Cook Islands are doing? How do they cope with these regulations and compliance?
Now for the previous communication.
Here is the correspondence and questions this Kiwi has raised which are good ones for anyone to use to ask any government official in any country contemplating signing a FATCA IGA:
In an email of 30 July 2013, he asked Inland Revenue the following questions:
1. How does the proposed FATCA legislation plan to circumvent the New Zealand Human Rights Act 1993, which forbids discrimination on grounds of National Origin, including citizenship?
2. Has the Privacy Commissioner been consulted on the implications of passing FATCA legislation into New Zealand law?
3. What is the estimated cost of implementing the FATCA legislation to the New Zealand Taxpayer?
4. What benefit will New Zealand receive in return?
In a followup email of 5 August 2013, he asked the following 21 questions, which expand on the four questions above:
1. Has New Zealand sought the advice of legal experts on the potential conflicts of the proposed IGA with the New Zealand laws referred to above?
2. If so, what has their response been?
3. If such consultation has not occurred, does New Zealand plan to seek such advice prior to the signing of any IGA?
4. Has the Human Rights Commission been notified of the intent to introduce legislation that will conflict with the New Zealand laws referred to above?
5. If so, what has their response been?
6. Has the Privacy Commissioner, or any other legal authority, been consulted on potential conflicts of the proposed IGA with that section of the Bill of Rights and other provisions contained within the Privacy Act?
7, If so, what have their responses been?
8. If such consultation has not occurred, does New Zealand plan to seek such advice prior to the signing of any IGA?
9. Has New Zealand considered the safety and security aspects of such a database falling into the wrong hands, and the possible effects on those New Zealand citizens identified as ‘American”?
10. How can New Zealand guarantee the protection of this information once it has been transmitted outside of its control?
11. Does New Zealand realise that the data collected and sent to the IRS may be shared with other US government agencies for purposes unrelated to taxation, with no further consultation or agreement?
12. If so, is it considered acceptable to expose the personal and financial data of New Zealand citizens in such an unconstrained manner?
13. What is the estimated cost of implementing the FATCA legislation to the New Zealand Taxpayer?
14. What financial benefit will New Zealand receive in return?
15. Is New Zealand aware that the US Treasury has no authority to provide reciprocal reporting?
16. Is New Zealand aware that the IGA is not a treaty or a treaty amendment subject to approval by the US Congress?
17. Does New Zealand plan to sign the IGA in the absence of firm legislation from the US providing the promised reciprocity?
18. Has an estimate of the revenue that would be raised by such reporting been performed? If so, what are the estimates?
19. Is New Zealand aware of the potential taxes, fines and penalties that may be levied on New Zealand citizens (and therefore the NZ Treasury) as a result of the US “diaspora tax” which will be enforced using FATCA? If so, have these costs and the effect on the persons involved been factored into the equation?
20. Will New Zealand inform the US and the New Zealand public that it will not enforce the collection of taxes and FBAR penalties on New Zealand citizens, in the same manner that Canada has done?
21. As part of the negotiation, has New Zealand considered requesting a streamlined renunciation process, free of the fear of penalties or exit taxes, for New Zealand citizens who wish to formally renounce their unwanted US citizenship.
Inland Revenue is treating your questions as a request for information under section 12 of the Official Information Act 1982 (OIA).
Here was the IRD Response which lead to the final email answer which was posted at the beginning of this post.
Given that your 21 specific questions appear to build on the first four more general questions, I will respond by answering your specific questions. This is on the understanding that my responses will also adequately cover the issues raised in the initial four questions.
Where a single response can cover a number of questions, I have grouped your questions to accommodate this.
Where information is being withheld, the reasons for doing so are stated.
Regarding questions 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12
Any documents related to Inland Revenue’s risk analysis of FATCA data security are being withheld under section 9(2)(f)(iv) of the OIA on the basis that internal systems to receive, accommodate and transmit FATCA data have yet to be fully developed. The issues are therefore still under active consideration by officials and Ministers.
However, any exchange of information with the United States pursuant to an IGA would take place under Article 25 of the Convention between New Zealand and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (referred to as the double tax convention or DTC), as amended in the 2008 protocol. Article 25(2) provides:
“Any information received under this Article by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment, collection, or administration of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes referred to above, or the oversight of such functions. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. ” [Emphasis added by IRD]
Regarding question 13. What is the estimated cost of implementing the FATCA legislation to the New Zealand Taxpayer?
Documents related to implementation costs of FATCA-enabling legislation (and any IGA) are being withheld under section 9(2)(f)(iv) of the OIA on the basis that work is ongoing. The issues are therefore still under active consideration by officials and Ministers.
Regarding question 14. What financial benefit will New Zealand receive in return?
Inland Revenue considers that it is not possible to accurately predict the financial benefit of entering into an IGA. A high-level cost/benefit analysis was undertaken as part of obtaining Cabinet approval to enter into IGA negotiations. The relevant parts of this Cabinet paper are publically available on the Treasury website www.treasury.govt.nz, at Publications > Information Releases > Budget Information > Budget 2013 > Other Papers Votes I to R > Revenue > 4 October 2012, Cabinet Paper, Foreign Account Tax Compliance Act (FATCA).
Because this paper is already publicly available, I am refusing this part of your request under section 18(d) of the OIA.
Regarding questions 15-17 Is New Zealand aware that the US Treasury has no authority to provide reciprocal reporting? Is New Zealand aware that the IGA is not a treaty or a treaty amendment subject to approval by the US Congress? Does New Zealand plan to sign the IGA in the absence of firm legislation from the US providing the promised reciprocity?
These questions relate to the internal implementation of FATCA and any IGA by the United States. Inland Revenue is proceeding on the basis that the IGA will be a “treaty” and does not consider it appropriate to question the sovereign right of the United States to enter into and implement international agreements. International agreements are negotiated on a good-faith basis on the assumption that the parties will be able to implement their terms. We do not hold any documents that address these questions. This part of the request is thus refused under section 18(e) of the OIA, as such documents do not exist.
Regarding question 18. Has an estimate of the revenue that would be raised by such reporting been performed? If so, what are the estimates?
Please see my response to question 14.
United States taxes
Regarding question 19. Is New Zealand aware of the potential taxes, fines and penalties that may be levied on New Zealand citizens (and therefore the NZ Treasury) as a result of the US “diaspora tax” which will be enforced using FATCA? If so, have these costs and the effect on the persons involved been factored into the equation?
Other than the high-level cost/benefit analysis set out in the Cabinet paper referred to above, we do not hold any documents that address this question. This part of the request is thus refused under section 18(e) of the OIA, as such documents do not exist.
New Zealand respects the United States’ sovereign right to impose taxes in the manner it best sees fit.
Inland Revenue considers it important to note that FATCA and any IGA will not alter existing taxing rights. The DTC with the United States attempts to prevent double taxation on income and, as noted above, already provides for the exchange of information.
Enforcement of Penalties
Regarding question 20. Will New Zealand inform the US and the New Zealand public that it will not enforce the collection of taxes and FBAR penalties on New Zealand citizens, in the same manner that Canada has done?
The ability or otherwise of Inland Revenue to collect taxes on another country’s behalf will depend on the wording of agreements reached between countries. Information related to IGA negotiations with the United States is being withheld under section 6(a) of the OIA on the basis that its release would be likely to prejudice the international relations of the New Zealand Government. <b>Inland Revenue notes that the United States DTC does not contain a general “assistance in the collection of taxes” article.</b> However, the actual effect of the DTC, including whether the DTC is superseded by other arrangements, is a legal question. <b>The Government’s strategy for addressing the [superseding] question you have raised is currently being considered by officials.</b> Therefore, any documents detailing the nature of these discussions are being withheld under section 9(2)(f)(iv) of the OIA.21.
<b>As part of the negotiation, has New Zealand considered requesting a streamlined renunciation process, free of the fear of penalties or exit taxes, for New Zealand citizens who wish to formally renounce their unwanted US citizenship.</b>
Inland Revenue considers that the renunciation of United States citizenship is a matter solely for the United States to determine. We do not hold any documents that address this question. This part of the request is thus refused under section 18(e) of the OIA, as such documents do not exist.
[emphasis added by Just Me]
Inland Revenue anticipates that some of the documents that are currently being withheld may no longer be subject to the relevant OIA provisions if legislation giving effect to any IGA is enacted. As part of the legislative process, the lead agency (in this case, Inland Revenue) is generally required to produce a regulatory impact statement setting out why the legislative solution suggested is preferable. It is also expected that any such legislation will be subject to review by a select committee that will be open to public submissions.
If you do not accept our decision on the information being withheld, you may make a complaint to the Ombudsman and ask that this decision be investigated and reviewed. The Office of the Ombudsman can be contacted at PO Box 10152, The Terrace, Wellington 6140, or via its website, www.ombudsnnen.parliament.nz.
Alternatively, you may have the decision reviewed by a review officer who reports directly to the Commissioner of Inland Revenue. Choosing the internal right of review does not preclude you from subsequently seeking a review by the Ombudsman, should you be dissatisfied with the department’s internal review. To request an internal review, please write to the Commissioner of Inland Revenue, PO Box 2198, Wellington 6140, setting out the details of your complaint.