A fascinating article from Russia’s KM.RU by Valentin Katasonov. It goes a long way towards explaining the contradictory signals emanating from Russia regarding support for FATCA. Mr. Katasonov outlines the relationships between some rather strange bedfellows – or perhaps they’re not so strange at all.
Here is the original Russian-language version:
FATCA: о чьих интересах хлопочут российские власти?
And here is the imperfect, yet reasonably intelligible Google Translation version:
FATCA: whose interests are fussing about the Russian authorities?
IRS wants to make agents out of banks and other financial institutions of the world
Abbreviation FATCA increasingly common in the Russian media. So short is called American law, the full name of which – «Foreign Account Tax Compliance Act». Translated – “On the Foreign Account Tax Compliance.”
FATCA as a tool for the construction of Pax Americana
The law was signed by U.S. President more March 18, 2010. Then began its gradual enactment. The next year, he should enter into force in its entirety. It belongs to a new generation of American laws, which can be called extraterritorial. These are the laws that apply to a number of other countries, and sometimes even the whole world. These are laws that help build Washington Pax Americana.
FATCA law was passed under the pretext that the U.S. Treasury regularly loses a large amount of taxes to withhold individuals and legal entities the U.S., bringing their income and assets outside of U.S. jurisdiction. The American tax system is set up so that individuals and legal entities must pay U.S. taxes regardless of where the income and asset allocation. Only on departure of U.S. citizens and companies in the offshore, according to some estimates, the U.S. federal budget annually loses about $ 100 billion. And how much he loses by U.S. citizens and companies in other jurisdictions, no one believed. For many years, even decades, Washington tried to fight tax deviators located outside the country, but the effect was short.
Act FATCA, according to its initiators, should put an end to such deviators once and for all.How? And just doing some banks and other financial institutions all over the world by the American Tax Service (IRS – Internal Revenue Service). Financial and banking organizations must transmit to IRS information about their customers with U.S. origin or having a business (commercial) due to natural and legal persons U.S.. In the list of customers, among others, and included persons who are holders of U.S. green card. If necessary, such agents should engage even the recovery of taxes from such customers in favor of the United States.
We are witnessing a unique alignment of the global system, “head” which is the U.S. agency, and all financial and banking organizations formally sovereign states coming under the administrative control of this department. Those who refuse to Uncle Sam’s invitation to become part of this system, are automatically “outcasts.” Against such financial and banking institutions, Washington will impose sanctions in the form of withholding 30% of the funds that such organizations will conduct through the U.S. banking system. And since the modern world financial and banking system is based on the dollar, it’s hard to imagine a bank that would not exercised dollar transaction. All such transactions pass through the correspondent accounts of non-US banks in U.S. banks. One gets the impression that the fight against tax deviators Washington – just an excuse to enactment. Home, unpublicized goal FATCA – build a global financial system, the individual “cells” which is not only economically, but also administratively subordinated to official Washington and of the financial oligarchy, whose service is formal authority USA.
World reaction to the FATCA
So, in the next year, all non-US banks have to start practical work to assess and customers falling under the definition of “American taxpayers” and at the end of the year (according to other sources – in March 2015) to submit their first reports to the IRS. Accordingly, Washington sanctions against non-US banks, evading honorable duty “U.S. tax agent” can be used to start a year and a bit.
It is not hard to imagine what the reaction around the world called the law – especially among U.S. citizens. Began renting U.S. passports: U.S. citizens do not want to be under the “hood» IRS. Several million Americans live permanently outside the United States, they will first give up U.S. citizenship.
It is not necessary to speak about the reaction of non-US banks and financial institutions.Statesmen and politicians in several countries grumbled, grumbled, calling the law a manifestation of the “American colonialism”, but were built by a team of Uncle Sam.
Especially that Washington has made some concessions. He invited other countries to a two-tier system: non-US banks provide information on U.S. taxpayers not directly the IRS, and their national tax authorities. And those, in turn, has sent her to Washington. To do this, Washington was asked to sign the relevant bilateral intergovernmental agreements between the United States and other countries on the implementation of FATCA. About 50 states have expressed willingness to sign such agreements. Hastened to conclude agreements, countries such as the UK, Denmark, Germany, Hungary, Ireland, Japan, Mexico, Norway, Spain, Switzerland. A few days ago the media reported that signed six agreements – with Malta, Bermuda and three dependent territories of the United Kingdom (Islands of Jersey, Guernsey, Maine). Thus, at the end of this year, the number of bilateral intergovernmental agreements on FATCA to 18. Banks of those countries that do not sign the intergovernmental agreement, must go into the “direct subordination” of the U.S. tax service.
Russia’s reaction to FATCA
And as Russia reacted to the law FATCA? Initially (two or three years ago), the reaction was very negative. In particular, the Russian Foreign Ministry described the law as an attempt by Washington to impose its diktat to other countries of the world. Then, in 2012, the band came complete silence. Our government would not acknowledge the law FATCA, no measures were taken. Only occasionally by our officials made comments that if Russia started to fulfill the terms of FATCA, it would enter into conflict with the Russian legislation.In particular, FATCA provisions contradict the Russian banking secrecy and the Civil Code as regards contractual relations gap (if the Russian bank closes the account of American draft dodgers tax). Some Russian banks are nervous, knowing what position they would be if Russia does not sign a bilateral agreement with the United States. Then, without much from posting, departments “top” command was given to prepare their proposals for amendments to the Russian legislation to bring it into line with the new conditions generated by FATCA.
Only in 2013 occurred as a “perturbation”, which is periodically backed up by the Minister of Finance A.Siluanova statements that Russia is preparing a bilateral agreement on FATCA.About our angry statements of two or three years ago, no one remembers.
Siluanov spring promised that, say, to the end, an agreement will be signed. Is the end of the year, it has not yet been signed. What do the banks? The new chairman of the Bank of Russia E.Nabiullina said recently that banks before 2016 will not be able to prepare for compliance with FATCA. But Washington is adamant, stating that any deferral is not going to give. Incidentally, it is not only the time but also money. Back in 2012 a non-profit partnership “National Payments Council” conducted a survey of 36 Russian commercial banks in order to find out how they are preparing for the implementation of FATCA and what are their capital and operating costs associated with implementation. Only the initial cost of buying the software, training, creation of methodological framework should be not less than one million dollars per bank. Ie across our banking system is about a billion dollars. This sensitive issue is bypassed. According to the “default” is the cost of Russian banks, as in the good it would have to be the cost of the one who stirred up all this mess.That is, the cost would have to be covered by the U.S. Internal Revenue Service. But, however, all this stuff on the background of the problems that may arise from Russian banks after that will come into full effect to the law IRS. After all, even a bilateral agreement with Washington is not a guarantee against possible sanctions. May become subject to sanctions and our state, if the IRS deems that the Tax Service zealously enough to meet the requirements of the law and the agreement. Subject to sanctions can be taken separately and the Russian bank. Recall how in the middle of the last decade, Washington instructed to close many Russian banks correspondent accounts in U.S. banks only on “suspicion” of money laundering and terrorist financing. I do not exclude that if U.S. lawmakers had the idea to legalize the “Magnitsky list”, then eventually in America may appear as a “black list” of Russian banks that violate FATCA.
About Russia, FATCA and our “elite”
However, from any adversity there is an exit. A way out of the situation called «FATCA» was from the beginning and from Russia. I recall that Washington within the scheme of bilateral intergovernmental agreement offers two basic variants. Conventionally, they can be called “asymmetric” and “symmetric” version of the Agreement. The first assumes that the foreign country takes unilateral commitments to implement the conditions dictated by U.S. law FATCA. The second option assumes that the two contracting parties undertake to provide the necessary information to the other side of the tax that may apply to legal entities and individuals of its State. In the second embodiment, the foreign country and keeps his face and solve its fiscal problems by identifying their tax evaders in the United States.
Preparation of agreement with the U.S. Treasury to our over several months was conducted in complete secrecy. Unofficial sources claim that both options were discussed. Finally, in October, our media have reported that the Russian Ministry of Finance is preparing a very radical agreement, which even differs from the “symmetric” version of the proposed Washington. Document called “intergovernmental agreement on the exchange of information of a fiscal nature.” It is not at all mention of American law FATCA, the agreement looks like a mutually beneficial agreement between two sovereign and equal states. This could only rejoice.
But that’s about a month ago, on November 28, the Prime Minister of the Russian Federation DA Medvedev listened to the preparation of the agreement. Prime Minister instructed the Ministry of Finance and the Central Bank “accelerate” and prepare an agreement to January 20, 2014. This is normal. Troubling more. Many media disseminated by the following information: “Medvedev is the first publicly supported the agreement and even mentioned FATCA, he instructed to prepare a draft agreement” to implement the provisions of U.S. law. ” Some commentators have not noticed anything. According to them, they say, is a game of words, the essence of the agreement does not change. I’m afraid that’s not true. It is because the “top” can not agree which option to choose – “symmetric” or “asymmetric”, so long in preparation of the agreement. Translated into plain language Medvedev’s words can be interpreted as follows: prepare for “asymmetrical” option.
Who benefits from this, I think, is clear. America for many of our kleptomaniacs – oligarchs and officials – has been a long time, “promised land.” There hiding untold riches, the stolen over the years of so-called reforms. Naturally, they are not declared and never accounted for. However, some estimates are available. The most famous of them belongs to “friend” Russia Zbigniew Brzezinski. This is an American politician, communicating with our scientists on the issue of missile defense, said that he “did not see a single case in which Russia could resort to its nuclear arsenal, while in U.S. banks is 500 billion dollars belonging to the Russian elite.” And then he added: “You have examined, whose elite is – yours or ours already. This elite did not link their fate with that of Russia. They money is already there, the children are already there … ”
Medvedev said before the completion of the term of the agreement remained about three weeks. So soon we will learn how Russia intends to build its relations with Uncle Sam under FATCA. This agreement will be very accurate indicator showing, whose same elite are senior officials of our government.
VY Katasonov prof., Etc. e. n., chairman of Russian Economic Society. SF Sharapova
If the U.S. is an Oligarchy, What Does that Make Canada?
Wouldn’t you think that US oligarchs would oppose FATCA because it restricts capital flows?
“Commenting on the Western sanctions, Russian Foreign Minister Sergei Lavrov said the United States is trying to make Russia cooperate through sanctions, but cooperation should be fair and not based on threats. He also noted American leaders are out of touch with reality, instead being led by morbid thoughts of punitive action.”
This we know is true.
Russia had already stated that it would change its laws to allow its banks to deal directly with the US in enforcing FATCA.
Speaking of Oligarchy: Green Party Leader Elizabeth May doesn’t mince words.
Love May’s feistiness, Calgary!
The longer he’s in the grave, the more he his words ring true:
There is hope though – “a well-informed, critical thinking population”. Is America up for the task?
“They call it the American Dream, because you have to be asleep to believe it.” RIP George Carlin.
@bubblebustin: Wouldn’t you think that US oligarchs would oppose FATCA because it restricts capital flows?
My guess would be that the U.S. ultra-wealthy class (mainly financiers & tech startup founders) supports FATCA because:
1. They can afford full-time tax teams to help them come up with ways of sheltering their income from U.S. taxes which are far more sophisticated than illegally hiding it in offshore accounts
2. The financiers in particular own companies which benefit from government spending & regulatory complexity (barriers to entry for competitors, particularly foreign competitors), so any increase in tax collection is offset by the increased profits
2. As Allison Christians points out) FATCA will tend to have the effect of putting all competing tax havens out of business, leaving the world’ largest tax haven — the U.S. — as the only place for foreign flight capital to hide from its home governments (fake promises of “FATCA reciprocity” notwithstanding).
So if FATCA really succeeds, even more foreign flight capital will find its way into New York hedge funds and Silicon Valley venture capital companies — meaning more two-and-twenty for American asset managers, and inflated portfolio values for American tech tycoons who can then cash out before the latest internet advertising bubble pops.
…and nobody seems to notice; and nobody seems to care!
The big known unknown is how even the threat of FATCA reciprocity will affect the US as the world’s premier tax haven. I can imagine that as long as the US continues to work toward reciprocity, the threat to those hiding money there would almost be the same – especially as more time goes by, or if it looks imminent that the US might deliver on its promise.
And unless I’m wrong, the US is actually at a disadvantage over other tax havens due to the number of reciprocal agreements it has – that’s if you are a tax haven that wants to attract anyone other than US people looking to park their money out of the eyes of their governments.
Some of the banks in the southern States like Florida and Texas wouldn’t exist if it wasn’t for foreign money. For many of these banks 80% of their deposits come from foreigners. When they leave it’s goodbye bank.
We have to remember that the US has thousands of banks, unlike Canada which has about a half dozen major banks that would be mostly unaffected by an exodus of money from US Persons.
Could it become a political issue in the southern states? Could a Democatic State turn Republican? If a bank loses 80% of it’s deposits, they can’t give out home loans and business loans. Money is hard enough to come by in the US right now, this FATCA thing will only make it worse for American residents to get loans.
Florida & Texas Bankers’ Association has filed an appeal on a ruling they lost about their depositors… I think Texas said they have lost about 500 million in deposits but I am not sure how old that number is. The info banks in the US release less intrusive then what others have to give up. In the US… I think they only have to report bank acounts.. nothing else… I could be wrong… The rich have already hidden their money… they have plenty of people who knows more about this then we do… I can’t even find decent honest info without the sound of ker-ching… ker-ching going off in a professional’s head…. sound of a cash register…
So much for my theory that other tax havens will have an advantage over the US in attracting people wanting to hide their money from their governments. India attempts their own version of FATCA aimed at Swirzerland: