Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 70 Comments

http://www.knax.co/2013/11/fatca.html?spref=tw

Taxation Bill introduced today includes rules allowing people to comply with foreign account information-sharing agreements.

The United States Foreign Account Tax Compliance Act (FATCA) legislation is due to take effect on 1  July 2014. Under FATCA, financial institutions, regardless of their location, will be required to report on certain United States account holders directly to the United States’ Internal Revenue Service, or face a withholding tax on United States sourced income of 30%.

It is proposed that New Zealand enter into an “intergovernmental agreement” (IGA) with the United States, to significantly reduce the compliance costs of FATCA for New Zealand financial institutions. Negotiations for such an agreement are currently underway.

The provisions in the Bill will enable financial institutions to comply with the IGA, and any future similar agreements.

70 thoughts on “New Zealand Govt introduces FATCA IGA implementation to Parliament”

  1. The government may be happy if the Supreme Courts upholds the right for Canadian citizens to keep Canadian $ account confidential. They satisfied the USA request for an IGA, forgetting about the Banks, they realize being cutoff from USA/world capital markets will have negative effect on Canadian interest rate. The USA can not do much if IGA accepted and the Supreme Court rules certain parts are invalid.
    It should also be noted that most brokerage firms and some banks ask, if you are an American citizen (they seem to ignore US person definition because that may have no validity in Canada). Why was a Supreme court challenged be prepared in that case if you thought it was easy?

  2. Tax avoidance is different from Tax evasion. Facta was not meant for minnows.
    PETROS did not file FBAR, is that tax avoidance or tax evasion. He is Canadian. no FBAR.
    He set up new accounts to hide his past history. He was just working the system.

  3. I don’t think that Petros not filing an FBAR is tax avoidance and certainly not tax evasion. I do think the two terms are merging and a lot of people and tax avoidance becomes tax evasion in people’s minds. I think that is deliberate. Not filing FBARs is part of your definition of beating the FATCA rules? What other things are within your definition?

  4. @bubblebustin, I was also trying to think up a useful analogy, but couldn’t.

    It’s painfully obvious that IANAL, but at any rate, how’s this for an approach.
    Scenario: FI asks you if you are a USP (not USC), or subject to US taxation.
    You: “I’m just a simple {insert-whatever-you-do} and have no idea what that means, can you provide me with some kind of definition to work with”.
    FI gives you a standard definition which includes being a USC.
    You: “I don’t believe you’re allowed to ask me about my national origin due to section 15.1 of the Charter of Rights and Freedoms. So, ignoring that part of the definition, I am not a USP”

    All the better if they provide you this on paper, as you can then take out your pen and strike out the offending words.

    Now the problem I see with this is that one doesn’t have to have been born in the US to be a USC. As such, one can make the argument that asking someone if they are a USC is thus not the same as asking them where they were born (national origin), and thus does not violate S15.1. Or does “national origin” encompass more than just where you were born?

    OTOH, it seems to be that if a FI (or the government) does a FATCA search and uses place of birth as a usindicia, that would almost certainly be a S15.1 violation. So, could not the argument be made that any actions taken based on that information are “fruit of the poisonous tree” and are thus disallowed?

  6. For individuals born in the US, “US personhood” can only be proved or dis-proved through a birth certificate. Asking to see a birth certificate is essentially asking for birthplace or national origin.

    I’m more concerned if Canadian banks plan to ask ALL Canadian customers to sign an IRS tax form stating their identity, ie. check this box if you are a US person, this box if you are not (under penalty of perjury from the IRS of course).

  7. Great question.
    If you falsely answered this question, would the Canadian Court not enforce US tax rule, due to the revenue rule,. The question should also be clear that the person is not committing commercial fraud, but just avoiding USA personal taxes. Can anyone confirm that other than an Guatemalan couple they have not extradited anyone?
    You may also cover yourself by putting a caveat into the form saying this can only be used, if I buy US assets. You then never buy US assets and do not sign up for real time quotes for the US markets. Would any lawyer comment on this.
    The CRA says it will not enforce IRS penalties on Canadian citizen,

    Petros could be arrested, if he crossed the US border for not filling FBAR, He has mentioned it a few times. He is very brave being so open. He has his 8854, which he could give to Canadian FFI The American can always demand FACTA II, demanding that people show FBAR for expats, if they want to own US Stocks The CRA does not even enforce FBAR for anyone.
    You can delete the previous post with all the typos

  8. @George, Calgary, The method I endorse would probably be seen as “structuring” rather than tax evasion or tax avoidance. Since FBAR is not a tax law, one is not avoiding or evading any taxes.

    Structuring one’s finances to avoid FATCA rules is likely a (US) crime as well. I agree with George that we should discuss how Canadians and others might structure their finances so as to avoid the unpleasant consequences of being a US person abroad. It only make sense.

    One of the things I always tell people is that they are their own worst enemy when it comes to the IRS. The IRS has no better source of information regarding the private financial affairs of Canadian resident than the person who sends in their own account and income information to the IRS. This is why I usually tell people it is a bad idea to enter the US tax system if they have never participated in it in the past. I completed my filings to the IRS but I did so because I’d already been filing my taxes in the US for the previous decade–it was the cleanest way to be done with the system. Those never in the system are better off letting sleeping dogs lie.

  9. Petros
    1) My original term was beat the system
    2) Are you safe traveling UK, France Or Germany?
    3) Under Canadian law can your current FI contact your old FI. for old record under FACTA? You do sound that you had more than 1 million. You may want to considering open additional account under 1 million if you have not already done so.

  10. Do not also sign up a bunch of Electronic transfer form from one FI to another. Under FACTA if one shows up the rest are alerted.

  11. Decided to post a comment today, on the interest.co.nz story on FATCA legislation….

    It may go to moderation, so just recording it here…

    I wrote….

    Unfortunately for Kiwis, most have no idea what FATCA is, or why this is an especially bad deal for New Zealand.

    FATCA is being imposed on all of your Financial Institutions, (FIs) for the “privilege” of participating in a global economy which is predominately conducted in $ USD. Its 544 pages of regulations and 37 some pages of amendments is onerous to the extreme, and so no wonder this legislation is something the Kiwi FIs are all lobbying for. It provides minor relief from hard business decisions.

    It is unfortunate that you and your financial community is being put into this situation.

    Rather than advocating that the New Zealand government threaten retaliatory actions (like cutting off NSA communication spying apparatus in NZ) for the brazen and unilateral demands placed on you, your privacy and human rights domestic laws are being changed to meet the extortion threats of the international bully, the USA.

    What do you think the chances are that America would change it’s laws to meet your demands for something from them?

    I understand the FIs condundrum in the seemingly untenable situation they find themselves in, but let’s call a spade a spade. The U.S. is extorting their compliance. They in turn, are asking the NZ government to enable the success of the very thing they rightfully hate. The IGA even with the enabling legislation discussed here, still only gets them off the hook for the 30% withholding threat. However, in that regards, it does BAIL them out.

    IRD claims aside, the IGA does NOT make the actual FI compliance ‘due diligence’ and ‘need to know standards’ any easier or less costly.

    This legislation and IGA actions just socialize the enormous compliance cost across all financial institutions, not just your big banks. It makes EVERYONE pay, even if they don’t desire any association with U.S. financial markets.

    Two simple questions:

    1. Where is the cost / benefit analysis that has been done to justify putting this extra cost onto the Kiwi Tax payers and consumers?

    Even the IGA and enabling legislation will still cost you big bucks to comply. Everyone will be impacted, not just some (few I would say) American depositors residing in the States. There is little benefit for Kiwis, but your IRD will have to add staff to administer this collection effort for the IRS. This is NOT a treaty with America, and you will NOT get similar reciprocity in spite what you might be told by the IRD.

    What is good for the Kiwi goose is NOT good for the U.S. gander!

    America (the hypocritical king) is NOT going to impose a domestic FATCA (DATCA) on its financial institutions in any significant way that provides your IRD with all the same complex data on NZ resident Kiwis they are requiring of your FIs on U.S. Persons residing in New Zealand and in America.

    There is too much opposition in Congress for this to happen, as represented by this letter from influential Congressman Bill Posey.

    http://bit.ly/10EX8tu

    He has already had legislation passed in the last Congressional session to stop the IRS from requiring even meager non resident alien interest reporting by USFIs to the IRS, which they hope to use as trading fodder for the IGA compliance.

    The U.S. Treasury needs additional legislation passed by both the Senate and the House to accomplish a full blown DATCA. They will NOT get it.

    Right now, the IGA contains only vague reciprocity promises which the FATCAnatics are calling a bi-lateral negotiation. That is the opposite of what it is.

    The IGA is a one way cram down!

    They are giving you some annex exemptions to coerce your compliance, promising a little bit of interest info on Kiwis resident in NZ that USFIs don’t really have. Try to add something else you want, or limit this to just residents holdings in each others countries FIs and you will quickly find you can not change the boiler plate of their demands.

    Question 2. How many impacted “U.S. Persons” are there living amongst you? America is looking for them too, and not just their homeland Citizens. How many dual citizens, green card holders and their spouses and children are now residing in New Zealand? 10,000, 50,000, 100,000 or more?

    If you don’t have the answers to just these 2 questions above, I would say, get them before you proceed further. There are many other questions one should be asking. Here is a list of 121 others MPs should ask Revenue Minister Todd McClay, before he just bows down to his U.S. masters and sign onto a very bad deal.

    http://bit.ly/Ia4zUd

    Just like Trans Pacific Pact, (TPP), which is negotiated in secret, you are being asked to surrender your sovereignty to America. By burying this in an omnibus bill, the tax bureaucrats at the IRD are assuring that America has its way before thousands of Kiwis living in New Zealand know they have been thrown under the bus.

    This is tax policy laundering by stealth. That is how it got passed in America, and that is how it is imposed on Kiwis. Never a straight up and down debate or vote. It has to be hidden inside something else!

    FATCA only gets occasional reporting in specialized publications catering to the elite compliance or regulatory types. You don’t see this story on the front pages of the New Zealand Herald, or nightly news on TVNZ, now do you? Why not? Too boring, or they don’t want the masses to know what they are up to?

    Now, you might think that stopping off shore evasion is a noble goal. Maybe you like the idea of a global GATCA, where tax and financial data is being exchanged automatically between big taxing and big spending governments, but what is the cost to the world economy for this idealist agenda? What are the systemic risks to the global economy for this added complexity on top of BASIL III, AML, KYC, SWIFT, Frank Dodd, etc, etc…? Is anyone asking?

    Also, what are the safeguards against ID and data theft for all this data exchange? How much information will now be processed by third party vendors? Who has access, and how secure is it?

    If you or your politicians don’t know how broad the category of “U.S. Personhood” is, or understand how rampant data and ID theft is in America, then you should be thinking twice before you sign up!

    It could be yours, your wife’s, your children’s, or your business partners comprehensive banking data which sent back to the International Revenue Service (IRS) on American shores. What are they doing with it? Who has access?

    If you are connected to a U.S. Person by marriage or business, if you are tainted with any U.S. indicia or are only an accidental American by birth, you will be subject to this loss of privacy and put at risk. Even if you still have a green card, and have not officially surrendered it, you will be caught up in this net.

    Remember, America does NOT follow international norms. It alone, (except for Eritrea) taxes based upon “citizenship”. New Zealand, like the rest of the enlightened nations of the world, taxes on “residency”, as it should be. You pay taxes where you receive services.

    For dual citizens, this means U.S. Citizenship has dominance over Kiwi Citizenship even if you live in Wellington, Dunedin or Dargaville! If you are connected with or have signing authority on any accounts of any U.S. designated ‘Person’ then your data is winging its way back to the U.S. homeland IRS data servers whether you like it or not! And remember, the U.S. decides who a U.S. Person is. The New Zealand government doesn’t get to say or disagree. It is an ever expanding list.

    So, stop and think about what your IRD is proposing to do with this legislation.

    Of course the FATCA Compliance Complex, (the BIG International Accounting firms and armies of CPAs and lawyers) who are co-enablers of the ‘You Must Comply’ FATCA message will get rich with the consulting hours they will bill out. Examine their self interest before you just accept their enthusiasm for FATCA compliance.

    One final point: I know that New Zealand continues its special spying relationship as a member in good standing of what is internationally known as the “5 eyes”. You, along with Canada, UK, Australia and the US, are a cooperative participants in the NSA spying coalition.

    Just like the UK citizens are now learning from Guardian Snowden reports, personal cellphone and web data information on Kiwi citizens is probably sucked up and stored like has been done with UK citizens. It is probably destined for Utah’s NSA storage center.

    http://bit.ly/19f3uVz

    So, if you like NSA spying on you, then you will love FATCA!

    This is just another back door spying operation on NZ financial institutions and customers under the guise of stopping tax evasion.

    As Senator Carl Levin, an author of FATCA has said, all of this FATCA data will be made available to the U.S. law enforcement agencies. Why? Once they have this back door access, with their insatiable demand for more data, with their hacking prowess, and with no limits placed on their actions, they will have EVERYTHING on EVERYONE in New Zealand.

    So, I would not rest easy on the “She’ll be right Mate” or “I have nothing to hide” attitude.

    Remember, America is the Largest debtor nation, and the BIGGEST tax haven and the largest spy master pursuing the mission of total global information awareness. FATCA is, plain and simple, a back handed effort to extract additional information and tax revenues / penalties from Kiwis. It is a hand in your NZ treasury cookie jar to help finance the latest entitlement program that homeland Americans don’t want to pay for with their taxes.

    Thanks for your contribution!

  12. Just Me,

    Here’s hoping that your explanation gets a viewing there by the people of NZ, including US Persons among them from one who very much knows about this!!

  14. A very good point brought up in the various comments of the NPR article– at what point does one start considering oneself to be an “emigrant” rather than an “expat?”

    To me, the word emigrant comes to mind when I first came to the realisation that I would never live or work in the US again, which was about five years after I had left in search of work to pay off my student loans and credit card debt.

    Good food for thought……

  16. @FromTheWilderness

    It is good food for thought. The word “expatriate” seems to have a lot of bad connotations associated with it, in that it’s confused with the word “ex-patriote”. That in itself implies that we are unpatriotic and capable of shirking our responsibilities as citizens, such as putting money above country.

    I can see how many of us living outside of the US on a permanent basis would prefer the term “emigrant”. There’s of a significant difference between “expatriate” and “emigrant” as some commenters have pointed out. “Expatriate” is someone who has left somewhere, whereas “emigrant” is someone who’s left FOR somewhere.

    I think I’m only going to use the term emigrant now – that is if I feel compelled to refer to myself as anything other than “resident” or “citizen” of the country where I call home.

  18. Does this mean the NZ would be prepared to change the privacy rights of a selected group of citizens?

    What does everyone think of this?

  19. @upset Yup, so you might want to contact your NZ MP and ask him what it means! I would bet he doesn’t know. So, try contacting the Finance Minister and ask him. No-one in Kiwiland media is paying attention, imho.

  20. I read some info from the links in this.

    The Govt implies that it affects US citizens/taxpayers – this is not entirely true. It affect NZ citizens only (not dual) and their families as all joint account holders info is required?

    It is the privacy of NZ citizens only that will be affected!!

    Any thoughts?

  21. @upset

    I have had considerable correspondence with the Revenue Minister (Todd Mcclay) on this issue. Initially he referred to people affected in NZ as “US taxpayers habitually resident in New Zealand”. I wrote back saying I found that term insulting, but the only change made in his terminology was to change the words used to “New Zealand Residents (who are also US taxpayers).

    He (and Treasury) refuse to use the term New Zealand citizens, or New Zealanders, in their letters and documentation. It is almost as if they don’t recognise the status of USP here as New Zealand citizens, even those that were born here !!!

    It is quite disgusting. I haven’t yet had a chance to go through the documents released last Friday in detail but I will be surprised if there is any change from the above.

    Join the fight – write to McClay, Bill English (Finance minister) media etc. and let them know what you think.

  22. @ osgoode
    I’ve suggested this before but have any of our Kiwi friends thought of asking Vinny Eastwood to do a show about FATCA? Have you anyone down there in the land of outrageously gorgeous scenery who would be willing to do an interview? Vinny is a champion of causes which are given little or no attention in the MSM.

  23. @Osgood

    Sounds like the NZ Govt does not mention NZ citizens in documentation as it does want to document that the IGA and associated laws will affect the privacy of NZ citizens only as well as dual.

    Any thoughts

  25. @upset

    They know very well what the story is, but use deliberate wording to try and portray the people affected as primarily “US Taxpayers”. There will be a Select Committee review so start preparing your submission now!

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