Shadow Raider (and others like NotThatTara, badger, bubblebustin, Em, NotThatLisa) have referenced the US National Taxpayer Advocate Report to Congress, so here is my slow uptake to posting for IBS. IRSCompliant has posted at Maple Sandbox: Maple Sandbox re US Taxpayer Advocate Report to US Congress — with reference to NDP Murray Rankin Letter to Finance Minister James Flaherty
From Shadow Raider:
National Taxpayer Advocate Nina Olson released her 2013 Report to Congress yesterday. As always, she included sections on international taxpayers and OVDP, and this time also one on FATCA.
As a bonus, Schubert posted there re US Chamber of Commerce, January 9, 2014: The Next Obamacare? FATCA Roll Out Flounders: US Chamber of Commerce Joins TAS in Dumping on FATCA
I quote from Schubert:
Unless our Finance Minister has taken leave of his senses, which I think extremely unlikely, I no longer think we’ll see a Canada-US IGA any time soon, if ever. With heavy-hitters like these in the US saying “wait a minute, what the hell are you doing and why?” why should Canada or any other country leap into an IGA with the US to sign onto something that seems to look like might actually get derailed or gutted PDQ.
Remember that previous US ambassador to Canada who, back in the Fall of 2011, advised everyone to “sit tight?” That’s starting to look like supremely good advice for many so-called US persons, especially “accidental” (I prefer “inadvertent” or “unwilling”) so-called Americans living in Canada (the parallels to Ted Cruz aka “border babies”). Let’s just wait and see how this train wreck is going to unfold now.
If I were one of that handful of countries that leapt into bed with the IRS via an IGA, or an FFI that has spent hundreds of millions of dollars on compliance mechanisms, I think I’d start to feel a bit foolish (and very hard-done-by) right about now. And if I were a compliance maven with visions of fat fees from terrified offshore alleged Americans dancing in his/her head, I think I’d see those visions turning to mush.
We don’t want to count our chickens before they’re hatched, but maybe it’s time to take a deep breath, ignore the Chicken Littles in the compliance industry, “sit tight” and watch with fascination what seems more and more like a FATCA train wreck.
Nice news for a wintery Friday, anyway. Happy New Year, everyone.
May it be a happier New Year as we see more awareness of the disaster that FATCA will be, combined with US citizenship-based taxation. Let’s hope for change of the false equation being used to apprehend real tax evaders on the backs of all those who will be collateral damage, ruining so many non-aware families and individuals, leeching money from other sovereign country economies and not at all conducive to paying down US debt or enhancing how the US is seen by the rest of the world.
Tax Prof Byrnes cites findings of Taxpayer Advocate, and notes that the statistics in her report debunks claims of GAO and Senate Subcommittee re totals of unpaid US TAXES recovered (actual tax vs. draconian and confiscatory OVD and FBAR reporting penalties):
……….”Amount Recovered Thus Far from Non-Compliant Taxpayers
According to the GAO Reports and the Subcommittee report, the 2008, 2011, and the ongoing 2012 offshore voluntary disclosure initiative (OVDI) have led to 43,000 taxpayers paying back taxes, interest and penalties totaling $6 billion to date, with more expected. However, the vast majority of this recovered money is not tax revenue but instead results from the FBAR penalties assessed for not reporting a foreign account. The Taxpayer Advocate found that for noncompliant taxpayers with small accounts, the FBAR and tax penalties reached nearly 600% of the actual tax due! The median offshore penalty was about 381% of the additional tax assessed for taxpayers with median-sized account balances.
Have These Efforts Substantially Increased Taxpayer Compliance?
The Taxpayer Advocate, replying on State Department statistics, cited that 7.6 million U.S. citizens reside abroad and many more U.S. residents have FBAR filing requirements, yet the IRS received only 807,040 FBAR submissions as recently as 2012. The Taxpayer Advocate noted that in Mexico alone, more than one million U.S. citizens reside, and many Mexican citizens reside in the U.S. (and thus are required to file a FBAR for any Mexican accounts of $10,000 or greater).
Thus, at a current rate well below 10% compliance (because nonresident aliens in the US must file a FBAR on their non-US accounts of $10,000 and over), it appears that all the additional enforcement is producing similar results of the War on Drugs. This is not to say that obtaining a highly level of compliance with the tax law , like compliance with the drug laws and DUI laws, is not a public good in itself – it indeed is a public good that the public has chosen, via Congress (and its investigatory hearings), for resource allocation. But like the War on Drugs, there are many potential strategies to bring about compliance, about which pundits such as law enforcement officials, social libertarians, the medical profession, and all their paid lobbyists, debate.”……………….
also Prof Byrnes cited the TAS report here:
…………..”…………The Report stated: “Since 2009, the IRS has generally required those who failed to report offshore income and file one or more related information returns (e.g., the Report of Foreign Bank and Financial Accounts (FBAR)) to enter into successively more punitive offshore voluntary disclosure (OVD) programs. … The programs were punitive, charging average penalties of more than double the unpaid tax and interest associated with the unreported accounts. … On average, the IRS assessed penalties of nearly 70% of the unpaid tax and interest in the audits of those who opted out.” The FBAR penalty of 50% of the account balance, for up to six years of non-compliance, equals a potential maximum FBAR penalty of 300% of the account itself, without regard to the actual tax due, interest thereupon, and tax penalties.
The finding that small account holding benign taxpayers paid penalties of nearly 600% of the actual tax due appears to be a miscarriage of the intent of policy makers…….”
“…..In comments made at the Pacific Rim Institute conference in Palo Alto, CA on January 30, 2014, Deputy Commissioner Michael Danilack responded to criticisms of the OVDI program currently in place. In fact, the National Taxpayer Advocate, Nina Olsen, filed criticisms of the initiative in her recent annual report. Ms. Olson, as reported by Tax Notes, criticized how the IRS has implemented the OVDP regarding foreign bank account report information returns and said the disproportionate penalties for small accounts versus large accounts mark the program as unfair.
One recurring criticism lobbied at the government is the “catch 22” phenomena where a participant is initially accepted and then is subsequently disqualified. The participant goes forward and files, submits a set of admissions against interest, waives Fifth Amendment rights and then is rejected. That’s obviously not an equitable process. Others have similarly been critical of the OVDP, with practitioners recently criticizing it as inflexible and participants complaining of being disqualified from the program after being previously accepted. In picking up on Ms. Olsen’s criticism, the fines imposed also seem to be excessive especially if the Department of Justice wants to pursue a 50% penalty per year approach which results in liability in excess of the highest amount contained in the “tainted” account…..”
A good starting point could be the National Taxpayer Advocate (NTA) changing her name to ITA (International Tax Advocate). It appears to me she plays a role in serving the needs of taxpayers internationally – not only at a national level. Anybody wish to suggest this to Nina?