RepealFATCA.com Roundup: News and Commentary on the Approaching FATCA ‘Train Wreck’
March 20th, 2014:
This RepealFATCA.com bulletin rounds up some important news and commentary from around the world on the looming July 1, 2014, “train wreck” of the “Foreign Account Tax Compliance Act” (FATCA). The headlines:
1. Even Tax Compliance Experts Decry Looming “Train Wreck,” Impossibility of Meeting IRS’s Requirements.2. Treasury (Inadvertently) Admits FATCA is a “Fishing Expedition.”3. Lack of “Reciprocity” Fatally Undermines Both FATCA and OECD “Information Exchange.”4. Rob Portman (Ohio): Big Pickup in Senate for Repealing FATCA.5. Canadians Fight Back.
@Tom Hunter
Won’t want to spend a lot of time – or words – arguing with you. Actions speak louder than.
Remember the expression “millions for defense, but not a penny for tribute”?
It still means something in Canada.
In 6 short days, two Canadian patriots raised more than $18,000 to hire Canada’s leading constitutional litigator as a first step in a legal challenge to FATCA’s discriminatory harmfulness under the Canadian Charter of Rights and Freedoms. They did so using social media and a basic web site.
@Theta, your earlier comments seem at odds with understanding PFIC. For example “You have to look at it from a comparative marginal income tax bracket perspective and this clearly shows that there are not many countries out there that tax less than the US.” Here the US is taxing PFICs at 100%.
Like Monalisa1776, I see PFICs as a massive problem for expats. Virtually every long-term US expat will have some investments in their home country. There is a very high probability that these will be held in local (non-US) collectives and funds, often because these are the only options available (non-US pension schemes, for example, clearly are extremely unlikely to offer US-domiciled funds).
@Theta
As @Wondering points out taxes on PFICs can (depending on the option for taxation) be 100%. Depending on the length of the holding period, they can exceed 100%. This does not include the compliance costs which are really a tax on tax.
The PFIC rules make it somewhere between difficult and impossible for Americans abroad to engage in retirement planning.
Could you please refer me to the book that you wrote on PFICs?
Thanks in advance.
@Watcher, what even rankles me more is that mutual funds are more geared up for the investor of modest means; the rich are more likely to be able to afford buying individual stocks rather than collectives, so I regard PFIC taxation as a direct attack on middle class vs rich Expats!! There’s also the added issue of 3520 problems because the IRS will probably argue that many non-US pension funds are foreign granter trusts…Yes, FATCA could indeed turn out to be a huge penalty generator via failure to file 8621, 3520/3520A, 8938, etc.
Many do-it-yourselfers relying on Publication 54 and software may well be oblivious to many of these obscure forms! I don’t believe that Publication 54 even makes mention of PFIC or foreign trust reporting; it’s almost as if they want to cause files to trip up and thus be able to ensnare them on mere technicalities!! This is why I concluded I had no other option than to rely on my specialized tax preparer…
Tom Hunter, you have shown us right there what most of the American public have grown tired of. That is the point we are making, over and over. We do not live in the US. We are, for the most part, collateral damage of US citizenship-based taxation law and FATCA is the gun to the heads of countries the world over, outside the USA. If the US changed to RESIDENCE-BASED TAXATION as the rest of the world (save Eritrea), there would not be the problem for individuals and families who have left the US and CHOSEN to live entirely in other countries. We pay our taxes to those countries; we get any benefits from our taxation in those countries.
We too feel the US should go after those who RESIDE in the US and fraudulently and willingly send their untaxed funds offshore — know who the real tax evaders of your country are.
For example, as it pertains to me, only one in the great number who have left the US to live in other countries and who have no plans to return. In fact, even the fact, that some of your US Congresspersons keep trying to pass punitive legislation to disallow me and others who renounce to return to the US to visit relatives (as any other citizen of the countries in which we live could) underlines what is the sense of US morality and entitlement.
I CHOSE to be a Canadian; I CHOSE to raise my family in Canada. I detest me or my children, born and raised in Canada, being referred to as “a American who happens to reside in Canada”, “an US citizen residing in Canada” or “a US taxpayer residing in Canada”. There are those who may think of themselves as “Americans who happen to be residing / living and for the moment working in Canada”. For those who plan to return to the “homeland”, they know their US tax and reporting responsibilities. I am not one of them. I have officially renounced. My son, born in Canada, raised in Canada, never registered with the US, never lived in the US (has been in the US less than 10 times in his 40 years), never had any benefit from the US, cannot renounce his automatically-acquired by birth to me US citizenship because of ‘mental incapacity’. The parent, the guardian or the trustee of such a person does not have the RIGHT to renounce that extraneous citizenship on such a person’s behalf, even with a court order. There is something wrong with US tax and nationality/citizenship law if one can be entrapped into that citizenship with no way out. It is NOT AT ALL about taxes owed. It is everything about the immoral cost in dollars and stress for the administration of an unwanted citizenship year after year after year. Change to a fair Residence-Based Taxation, then we’ll be able to discuss the great morality of the US. Otherwise, it is a cash cow that just reaps more US collateral damage.
@Theta
If you wrote a book about PFIC you should understand precisely why it is such a horrible thing. Your comment suggests you’re only looking at PFIC from one side of the coin. For those living overseas, that income is also taxed in the home jurisdiction. I was told that because PFIC taxation is treated as a separate class of income by the US and not dividend or capital gain you can’t take a credit to the UK for US tax paid (for instance) nor to the US for UK tax paid. It’s blatant and naked (without offset) double taxation. For those who who didn’t know about another obscure four letter US law or for accidentals, PFIC can decimate an entire life’s work. PFIC is brutal.
I managed to talk a TurboTax customer service rep into letting me have the software since they said it was not available for sale outside North America. Before I discovered it wasn’t sophisticated enough to handle my pretty simple (comparatively) overseas tax return I looked at the function where you can compare your AGI and US tax liability to others in your class. My US tax liability (before application of foreign tax credits) was 2.5x what the average American living in the US paid on the very same level of income.
@Susan,
I wonder which part of the US Constitution allows the government to make expats pay for US public goods and government services they never receive.
Expats don’t use US highways, roads, bridges, dams, hospitals, schools, courts, fire, police, ambulances, medicare, medicaid, obamacare, unemployment benefits etc. Expats don’t live in the US so how the hell can they possibly use or benefit from these things?
Call me stupid, but I still can’t figure out where the right is derived from for the US government to make expats pay for public goods and government services they cannot possibly receive. It defies all sense of logic and fairness.
The social contract between the US government and the American Diaspora is obviously broken and amounts to nothing short of involuntary servitude, that is, expats being forced to pay for the public goods and government services of homelanders.
The funny part is, that most homelanders believe that expats are supposed to be grateful to America and happy to pay their “fair share” for all the stuff they never get to use. After all, its a privilege to be an American.
@Theta
Well said:
The bottom line is very simple:
The U.S. wants to confiscate the assets of Americans abroad.
You say “End citizenship taxation and hardly anybody will renounce”. No, after the experience of the last few years, almost everybody who can renounce, will renounce. In fact, I would bet that if CBT ends it will accelerate the pace of renunciations. People will leave while they see an opportunity to get free while they can.
@Susan: You are looking for a copy of the actual legislation for FATCA.
FATCA was contained in the HIRE Act of 2010. FATCA can be found at Title V, Subsection A.
https://www.govtrack.us/congress/bills/111/hr2847/text
I have also sent you an e-mail at the contact you provided. Others may want to note Susan is interested in the possibility of a constitutional challenge in the United States.
What if CBT could be struck down by the US Supreme Court on the basis that only well off expats can afford to pay the fees to file US tax returns and so they are the only ones who will maintain their US citizenship in good standing. Average and poor expats are priced out of US citizenship not because they will owe any taxes but because they can’t afford all the filing fees and to keep up with the never ending and unaffordable penalties for innocent acts like having a local bank account that the US considers foreign.
Even though you are not allowed to renounce due to taxes and penalties, that is the primary reason that expats with limited resources are renouncing. One could say that the US government has devised a way for people to give up their birthright by imposing costs they simply can’t afford to pay.
If you come at getting rid of CBT from the position that it is causing poor people to lose their US citizenship that may be an argument that the Supreme Court could work with.
As long as the word CBT is connected to rich expats, we’re never going to win in a US court.
@susan
This is the text of the public law, which is what you really want for a court case:
http://www.gpo.gov/fdsys/pkg/PLAW-111publ147/pdf/PLAW-111publ147.pdf
The section you need starts at page 27 (offsetting provisions).
@ All
Tom Hunter’s brain is stuck in the cement of intransigence. He is, as Calgary411 told me awhile back “unreachable”. It’s also possible that he is an IRS or compliance condor shill whose mission is to stir the pot and divert our attention from the positive steps we are taking. I wouldn’t feed this little beastie too much although you can see I did just that at IBTimes:
http://www.ibtimes.com/political-backlash-over-privacy-could-come-tax-evasion-reform-fatca-speeds-1557585#comment-1276522241
@OMG
Nina Olson, National Tax Advocate, could testify in support of what you write!
@Disgusted
You are not off topic, re: quote from link below:
“Some, such as Justice Department whistle-blower Edgar Schmidt, are openly questioning who in government is minding the constitutional store. If the attorney general, the prime minister, Governor General and the chief justice of the Supreme Court aren’t, it’s pretty pathetic that they rely on citizens, Galati said.”
And that is exactly what happened here on IBS- $ raised by citizens to explore feasibility of launching a Charter Challenge. Truly pathetic. But as Galati points out, the Constitution is for the protection benefits of ALL citizens.
@Theta
Wow, amazing and amazing – your concise example to ‘Tom Hunter’. I tried a similar argument with my siblings both born in Germany, but they were too dismayed to imagine such a scenario. FATCA defies logic and fairness.
Off to Calgary Consulate Monday. Trying to keep calm, but meter goes between relief to do something about USC, and panic what ifs.
Tom Hunter is an idiot. Below is part of a conversation we are having at: http://www.squamishchief.com/article/20140320/SQUAMISH0303/303209976/-1/squamish/the-fatca-of-the-matter
Whitekat says:
If FATCA applied ONLY TO US RESIDENTS, you might have a point. However, FATCA is harming innocent people living in all other countries in the world, who are citizens of those other countries, earn no US income, and pay high taxes to the government of the country they live and work in. Many have little ties to the United States, but are portrayed as ‘tax cheats’ and the subject of a ‘witch hunt’ thanks to FATCA in combination with USA’s immoral citizenship-based taxation laws which have never been enforced, and largely ignored (for good reason).
All other countries in the world (with one exception – Eritrea) do not consider people who live and earn permanently outside their borders to be tax payers based on an accident of birth. USA needs to solve its debt problems WITHIN ITS OWN BORDERS, and find the tax cheats who live WITHIN ITS OWN BORDERS rather than extorting legally earned monies from other countries.
Tom Hunter says:
This does not pass the smell or logic test. According to the law, you are subject to FATCA only if you meet the following tests:
* You hold US Citizenship or are a lawful permanent resident (Green Card holder.)
* You were born in the US and have, therefore, the benefits of automatic citizenship.
* You address is in the United States, be it a street address or PO Box.
* You have standing instructions to transfer funds to an account in the US, or instructions for the maintenance of a non-US account come from a US address. (A shill account)
* You maintain an “in care of”, “hold mail” or “post restante” account that is the sole address for a given client.
* A power of attorney or signature authority over an account is granted to a person with a US address.
If none of these situations apply to you then you–anonymous coward–are not in any way shape or form subject to FATCA.
Your argument is in fact not with the US government but with the armies of tax cheats who brought this matter to a head with their flagrant tax evasion. Perhaps you would prefer to have some more generous loopholes so that you–or persons known to you–could have some wiggle room to go on cheating. So sorry this law was written so well, as it has become the model for governments across the world. So, bottom line is–too many taxpayers screwed up and now they spolled the party for everyone, even the alleged little guys like you.
From your last graph it sounds like you were born in the USA. If that’s the case, and you don’t want to gain the implicit benefits of holding a US Passport, then you are free to renounce your US Citizenship and take up residence in Somalia, where I’m sure they’re only too willing to take your deposits.
One last time–anonymous coward–the United States IS taking care of its tax-evasion problem. Please do renounce your citizenship–then all your problems are solved and your Somalian banker is waiting.
There’s a Tom Hunter who writes about FATCA at times:
“About the Author:
Tom Hunter (18 Articles)
Author of the bestselling novel “The Butcher of Leningrad” (a thriller). Novelist, Software Architect, Painter Native of Nebraska, Resident of Indiana, Citizen of the World Software Architect for 16 years: Insurance, Healthcare, Wall Street Author of the bestselling novel “The Butcher of Leningrad”. BA in Journalism from the University of Iowa. Minors in Russian, Computer Science Reporter and Columnist for the Daily Iowan in Iowa City, Iowa Editor for Neva News in St. Petersburg, Russia Editor and Publisher of Noggin Magazine in Iowa City, Iowa”
http://www.liberalamerica.org/2013/09/29/an-explanation-of-how-the-ultra-rich-ensure-continued-rising-poverty-levels/
I would like to challenge Tom Hunter on the statement made above:
“As the United States faces an epidemic of unpatriotic tax evaders….”
Could you please cite a study or studies which support this statement? Thank you.
Would Tom Hunter also be able to comment on a similar statement regarding “epidemic of tax evasion” made in the WSJ comments:
“10:53 pm March 5, 2014
Tom Hunter wrote:
Given the epidemic of tax evasion by rich Americans, FATCA is just what the doctor ordered. The Republicans are making noise about trying to get it repealed but that won’t happen anytime soon.
Any Americans who choose to renounce their citizenship rather than pay their taxes? Good riddance. They will shortly learn the myriad advantages of living in the United States, a country where we all pool our money and reap the benefits of shared funding for infrastructure. FATCA is one step toward leveling that playing field and it’s not a moment too soon.”
We are just sacrificial lambs to Tom Hunter. His partial response to one of my comments:
“As one human being to another, I feel bad that you have to go through this. But having been an American who has watched for decades as HNW individuals evaded our taxes while keeping their citizenship, I regret that this pain is necessary. “
Also quoted,
Theta
I want to encourage you to go on air if Jon will agree because I think it will help explain this to Vancouverites in a most excellent way
Please contact him
jmccomb@cknw.com
I will ask him to look for an email from “Theta”
Chears Big Ears
Somebody should tell Tom Hunter that people who renounce US citizenship do not end up living in caves. We live in countries that actually have better infrastructure than the US does. We pool our resources in Canada extremely well Tom, much better than the US does.
We actually have this thing called universal healthcare, you can only dream of it (Obamacare is not universal healthcare, it’s just really expensive insurance). We also have better roads and better working conditions for our citizens than the US does.
I can make a long list of reasons I would NOT want to live in the US and none of them have anything to do with taxes since the taxes we pay in Canada are much higher. At least Canada uses our taxes to help us instead of launching trillion dollar wars at the drop of a hat.
Susan Ouderkirk – I think that you have been referred to the documents but should you need further then please do not hesitate to actively contact Isaac Brock Society members – between us I am confident that we can point you in the right directions to the documents that you require. BTW have you seen the repealfatca.com web site? Mr Jattras there might be very helpful to your search.
From: http://www.saint-petersburg.com/essentials/press/ about Neva News; as in “Mr. Hunter is Editor for Neva News in St. Petersburg, Russia”.
Also http://en.wikipedia.org/wiki/Noggin_%28magazine%29 as in “Publisher of Noggin Magazine in Iowa City, Iowa”
@Tom Hunter – you really do need to get a better understanding of what is going on and what FATCA and CBT are all about. There are many documents referenced on this site and many personal testimonials … you would do well to do some homework here and at repealfatca.com before making such distressingly inaccurate statements. You are so far behind the curve that I certainly do not have the energy to get into lengthy discussion with you at this time. Information is available for you to so some self education.
I tend to ignore people like Ton Hunter because the USSA is full of gingoistic ‘my country right or wrong’ types that EVERYONE in the rest of the world hates. He might argue that some US RESIDENT tax cheats with hidden accounts overseas are bringing this on themselves resulting in typical American style extremist overkill reaction. I argue that the world absolutely hates the USSA and the USSA has brought this on themselves over the years. Not sure why people waste their time with jerks like him because he is really of no consequence. He has probably never even been abroad. He sounds like he hasn’t even traveled outside of his little pig farm outside Yazoo City, Mississippi. The responses and explanations here to him are easy for anyone with a third grade education to understand but unfortunately he represents the 90% of Americans that haven’t made it past the 1st grade.
The sad news for Tom Hunter is that if rich Americans renounce their US citizenship and move on to more friendly environments, it is Tom who will have to contemplate living in much worse circumstances because his personal taxes and the taxes of millions more like him will have to skyrocket to make up the difference.
The problem with the top 1% in America is not just that they make a lion size share of the money but they also pay a lion size share of the taxes. If people like Tom were to look at the actual total percentage of taxes paid by the rich versus all other American residents, losing even a small fraction of the 1% will have a devastating impact on the US. Sure chase them to the ends of the earth until they renounce, then you can scratch your heads and wonder how you’re going to make up for the loss of future tax revenue.