The Chicago Tribune reports: IRS not fully ready for law against offshore tax evasion: watchdog
One of the signs of a bad regulatory law is the inability of a government bureaucracy to implement it. The IRS apparently suffers from inadequate resources. Whereas Obama signed FATCA into law in 2010, the IRS is not ready to handle load nearly four years later:
Between 200,000 and 400,000 foreign banks, investment funds and insurers companies are expected to register with the IRS to comply with the law, TIGTA said.
This would be hilarious if the consequences of FATCA weren’t already so sad. Still, I experience great Schadenfreude over the farcical incompetence of the IRS.
This is an illustration of the hubris of United States which forces on all the world a system that they themselves can’t handle. Reality and satire stand together.
When US Ambassador Jacobson said “sit tight” what he probably meant is (I paraphrase), “FATCA won’t be implemented for years because of IRS incompetence. So just sit tight and nothing will happen for a long, long time. In fact, the IRS will never catch up with you if you procrastinate.” Excellent advice if you ask me.
On the other hand, it might be good to get down to a US Consulate and get yourself free, for you will want to avoid the rush that will happen post-FATCA implementation.
By the way, The Renunciation Guide is back online.
What really astounds me is that the IRS has only spent $8.6 million on FATCA so far. Every FFI beyond a moderate size will be spending much more than that to implement it. Every one.
Here is the TIGTA report:
http://www.treasury.gov/tigta/auditreports/2013reports/201320118fr.html
FSI Tax Posts reports the development and offers a chance to comment:
http://www.fsitaxposts.com/2013/12/06/tigta-improvements-needed-fatca-registration-portal/
AND, what about that pesky cost/benefit analysis that they have never done?
If you thought the Obamacare web-site launch was a mess, just wait until thousands upon thousands of FFI’s wait until the last minute to reluctantly pick-up their IRS deputy badges.
@notamused
Actually, the $8.6 million is just the amount they wasted implementing the first system which was scrapped in 2012 as a result of the entering into of IGAs. Maybe their system didn’t contemplate “reciprocity”. Total cost for the computer system is expected to be $16.6 million (http://www.treasury.gov/tigta/auditreports/2013reports/201320118fr.html). Still, as you highlighted, it’s a fraction of the cost spent by just one FFI.
There are some widely differing numbers when you look at estimates produced by various countries. The TIGTA report says they expect 200,000-400,000 institutions to register. The UK government believes there are 75,000 impacted FFIs in the UK alone (http://www.hmrc.gov.uk/fatca/itc-regs-2013.pdf). So, apparently, the UK has between 19-38% of the entire world’s FFIs (and that’s after reducing the number from 300,000 as a result of the IGA).
Rather hilariously, that same UK government document, suggests that the 75,000 affected FFIs will have to spend on average just $23k-$43k each to implement FATCA in the first five years. Obviously, $23k-$43k doesn’t even get you a fraction of a FATCA responsible officer let alone a new client onboarding system or, should you wish to continue to serve the US persons your new onboarding system identifies, an all-singing, all-dancing 1099 reporting system on an FFI wide basis. Anybody else willing to guess that the UK overall estimate of $1.8-$3.2 billion in the first five years is a fraction of the actual total cost?
Schadenfreude aside, I do have grave fears that FATCA could lead to financial system turmoil worse than the Lehman collapse. Given what a cracking job the US does at managing things like the no-fly list (http://papersplease.org/wp/2013/12/04/no-fly-trial-day-2-dr-ibrahim-gets-her-virtual-day-in-court/), I’m fully expecting FATCA compliant FFIs will find their way onto the not FATCA compliant list. I just hope it doesn’t happen to a large FFI.
Cross-commenting:
The Treasurer: Feeling the Force of FATCA
And @Edelweiss, re the flaws with the no-fly list – including the lack of transparency and recourse, means that the equivalent holds for individual account holders around the globe under FATCA. There will be errors in reporting and withholding. There will be errors in declaring people recalcitrant, or in erroneously identifying account holders as ‘US reportable and taxable persons’.
Ever tried clearing up an error where you are the complainant, and the adversary is a large and powerful entity? Whether it be a bank, or the USG, they can’t be bothered, and the onus is all on you – even if/when they agree that you’ve got a point. Problem is, we can choose not to fly, but can’t really choose not to have some type of account to receive our wages, etc. I believe they’ll err on the side of over-reporting rather than under, and err on the side of satisfying the US, even if that results in unwarranted problems for the individual who actually owns the assets.
@badger
There’s no doubt the IRS will be calling the shots and making all kinds of adjustments once the holes in their tax and penalty collection scheme are known, and they won’t certainly be to the benefit of the bank.
“If the camel once gets his nose in the tent, his body will soon follow.”
@Badger, I share your fear. I worry that many who’ve already renounced could still be assumed by their banks to be US persons, especially if their country of residence has an IGA, with their details bring inadvertently relayed to their government.
They could face 30% withholdings on money wired from American financial institutions, erroneous IRS letters demanding to know why they hadn’t been filing, reporting these ‘foreign’ accounts, etc. I’d imagine that it could be sorted out, especially for anyone on the List, which would serve as proof of expatriation…. however, claiming back inevitably numerous 30% withholding could prove very tedious and drawn-out….
What would a good boondoggle be without some serious in-fighting between government agencies:
“While we agreed with the recommendations, we take exception to the conclusion drawn by TIGTA that states a major redesign of the system was necessary due to IRS not sufficiently developing requirements and hence the title of the TIGTA report,” aid IRS chief technology officer Terence V. Milholland in response to the report. “As we discussed during the audit, the major redesign was due to late regulatory changes, driven by significant public feedback on the draft regulations that impacted the in-flight system design. The facts show that IRS terminated the release immediately upon learning of the new regulations. In addition, to ensure the new FATCA development was implemented and deployed timely and within acceptable cost thresholds, IRS management timely identified and communicated system changes to minimize costs and reduce waste. IRS continues to adhere to published guidance, standards and procedures for life-cycle development, testing and program management. Therefore, we disagree with TIGTA’s conclusion that adequate program controls improvements are necessary. FATCA did in fact have strong program management principles in place…”
Milholland added that he continued to disagree with the “outcome measures” in TIGTA’s draft report, in which TIGTA compared the projected costs of two iterations of the software and calculated the potential amount of “inefficient use of resources” to be around $2.2 million.”
http://www.accountingtoday.com/news/IRS-Needs-Make-Technology-Improvements-FATCA-Implementation-68923-1.html
Speaking of the US and lists and getting yourself off of them, it only took the US 20 some odd years to conclude that Nelson Mandela wasn’t a terrorist (http://www.telegraph.co.uk/news/worldnews/africaandindianocean/southafrica/2233256/Nelson-Mandela-removed-from-US-terror-list.html). And a remarkably speedy 15 years after he won the Nobel Peace Prize…
No they’re not ready. Six months to process a tax return from submitted from abroad and they want to add on top of that the responsibilities of FATCA?
Why oh why could they not have run a commission to study American Abroad BEFORE implementing something like FATCA and used that data to tailor the program to go after actual tax cheats instead of every single expat in the world.
They haven’t been ready since they insisted upon making this program so backward. The pretzel logic is exhausting to try and follow.
MonaLisa. You worry toooooo much. None of the things you mention are going to happen. More likely you might be hit by lightening. You were brave enough to renounce. Don’t wimp out on me now!
monalisa,
I agree with KalC. Your worry about what the US may do even though you have your proof of loss of US nationality for your own country and its banks does not accomplish anything for you. You have come so far. You have your CLN. Stop worrying about things over which you have no control. You did have control over some things and you took many brave steps to get what you accomplished. You did the something you needed to do as you did have control there. Now try to stop the worry about things that are not likely to happen and for which your worry will not change any outcome.
As Petros says, it is best for all of us to get our asses and our assets out of the US. We’re doing that. If you have US investments, you could make the choice to change them. Other than that, find the things that give your life meaning, consciously trying to leave the worry.
Many here are corresponding with our own countries. We are trying to point out our stories to the media, doing things we may have some control over — giving it our best try. I’m no longer a US citizen, nor are you. Our voices and what we do are no longer for the US but our own countries.
I agree with Samuel Adams comment and thoughts. I can’t comment on the article referenced because ‘I, too, don’t do Facebook”: http://isaacbrocksociety.ca/2013/10/21/we-are-not-a-myth-put-your-photo-on-the-tumblr-portrait-protest/comment-page-5/#comment-769101. Changing the tone of those stories to all the unintended consequences for persons and families is important to me, but more in my own country.
What a mish-mash of words. But I’ll leave them for now. Hope you know what I’m trying to say.
@Edelweiss: ” I do have grave fears that FATCA could lead to financial system turmoil worse than the Lehman collapse. ”
wow, really? My fear is that it won’t! Let’s not go there 😉
On November 20 the Dutch daily de Telegraaf published an article in their Financial section called ASR and NN (two large Insurance companies here in the Netherlands) dumping Americans. All because of this stupid FATCA legislation. For some reason I am unable to upload the translation. Pls give me an e-mail address and I’ll be happy to copy you guys in on this.
@Eric-I am unable to find this de Telegraaf article here on ASR and NN insurance co dumping lcients, even on the Telegraaf translated pages? please kindly post the link if you have time. Many thanks
Link to partial De Telegraaf article on two Dutch insurance companies forcing out American policy holders due to FATCA:
http://www.telegraaf.nl/dft/nieuws_dft/22070113/__NN_en_ASR_lozen__Amerikaan___.html
wo 20 nov 2013, 07:00
NN en ASR lozen ‘Amerikaan’
door Edwin van der Schoot
AMSTERDAM –
Per 1 juli 2014 moeten ook verzekeraars voldoen aan de Foreign Account Tax Compliance Act, de wet die belastingontwijking door Amerikanen moet tegengaan.
Het betekent voor verzekeraars een hoop extra werk voor gegevens die via de Nederlandse fiscus aan de Amerikaanse IRS geleverd moeten worden. Indien er fouten worden gemaakt, is de verzekeraar aansprakelijk.
Lees vandaag in de Financiële Telegraaf waarom verzekeraars bang zijn om mensen met een Amerikaans paspoort te verzekeren
Crystal, Innocente has posted the link to a partial article in his comments. Give me an address where I can send you the full article (translated). Take care, Eric
Here’s the translation of de Telegraaf’s articler of Nov 20, 2014:
Rotterdam- The Dutch insurers ASR and Nationale Nederlanden no longer want anything to do with consumers who have ties with the US. A bank account, address or even a telephone number is sufficient to be thrown out. The reason? Expensive tightened US law, making it lerss expensive to sever ties with US persons. As of July 1, 2014, insurers must also comply with FATCA, a law which is meant to edliminate tax evasion by Americans. It means a lot of extra work for insurers in order to provide data to the US IRS through the Dutchj tax authorities.
If mistakes are made, the insurer is liable. US persons, the customers at issue, are subject to a number of laws under the jurisdiction of the American authorities.
One consequence may be that in the case of a dispute, there is a threat of a lawsuit in a US court.
Or, that the IRS makes an unexpected call as recently happened to a Dutch Korea veteran after 60 years.
The choice is simple explains Remco Smorenburg (Norton Rose Fullbright). An insurer will evaluate whether it is going to hire extra people in order to make sure that all risks will be monitored and operations be adjusted. The costs often outweigh the benefits according to Smorenburg.
During the recent weeks, Nationale Nederlkanden mailed a letter to all of its customers instructing them to report if they have a green card (residence permit), contact- or bank account information, mailing address, fiscal address, bank account or a phone number in the US. Also compatriots who happened to have been born in the US can be classified as “US persons”.
Investment accounts are cancelled and mortgages with an investment account as collateral will be adjusted and/or modified. This applied to customers of Nationale ~Nederlanden as well as Westland Utrecht. The latter is being integrated in theNationale Nederlanden as a divestiture of ING Bank.
In addition to Nationale Nederlanden, ADSR is going to implement the same measures, as confirmed by the Utrecht-Rotterdam Dtate insurer. Both parties are gearing up for an IPO and the elimination of risks is an important issue for potential investors.
Delta Lloyd informed us that this issue is of less importance to them. AEGON, traditionally more focussed on the US is going to keep an eye on developments for the time being.
Banks like ABNAMRO and ING already hedged their services to US persons.
In the Netherlands, a total of 6.5 million investment insurance policies were sold since the 90’s. Some of these were what is known as “profiteering policies” To make matters worse, a number of these policies will have to be gotten rid of. Eric (US/Dutch citizen)
Thanks, Eric and Innocente.
Even more amazing that these atrocities are happening, because US Persons are now toxic with FATCA, is that most of the very people affected are asleep and somehow letting it happen to them.
Related absurdity happening behind closed doors: http://www.youtube.com/watch?v=bPIsjH25GHo&feature=youtu.be&desktop_uri=%2Fwatch%3Fv%3DbPIsjH25GHo%26feature%3Dyoutu.be&app=desktop
Hi guys and girls,
There is more: earlier this year the ABNAMRO bank advised me that I had to close my investment account because I am “the American person” on it. I am stuck now with a checking and savings account on which you hardly make any money, take inflation and taxes off and you end up with nothing.
It really amazes me that quite a number of nations (wimps) already have given in to the demands of the US Government.
@Calgary and @Kcalc, as ever, thanks so much for your kind words of reassurance even though I am admittedly a worrier; I know for a fact that I will rest easier once I’ve finally finished with all my filing and exit paperwork next year.
It just disturbs me though how banks and insurance companies are confering the tainted US status even for merely having a US bank account; I will need to keep one open, even if it only has a couple hundred dollars in it, as long as my parents are alive.
What I naturally worry about is that the financial institutions might continue to discriminate even against some former citizens and former Greenland holders, especially those who might be Snowbirds with property in the US, etc. They could inadvertently resume their US personhood if they overstated, etc. But agree, I have to stop worrying unnecessarily over things beyond my control…
In a way, if things literally become impossible, I’d be even more optimistic there will eventually be enough pushback for proper reform to finally take place, such as what happened after the fallout from the fury caused in the late 1970s over the loss of the FEIE and them eventually restoring it in around 1981.
“to discriminate even against some former citizens and former Greenland holders”
Interesting little typo there, monalisa. If I was a Greenland holder I might consider going to Greenland to live … except for the ominous presence of that U.S. air force base at Thule.
Of course the date of that Telegraaf article was November 20, 2013