What would happen if New Zealand didn’t pass a law to allow FATCA reporting?
If there was no change to New Zealand law, financial institutions in this country would, unless certain exceptions applied, have to pay a 30 percent withholding tax on certain US income. This financial cost would undoubtedly be passed on to a broad range of New Zealand consumers.
Most New Zealand banks receive some US income. For instance, US Treasury bonds play an important role in setting global interest rates, and are often used by banks to reduce their exposure to interest rate risk.
If New Zealand did not pass a law to allow FATCA reporting, banks and other financial institutions in this country may be unable to comply with FATCA without breaching the privacy principles relating to the collection and disclosure of client information.
If New Zealand did not negotiate an IGA with the US, the effect on American citizens and green card holders resident in New Zealand would be that it would be easier for them to avoid meeting their obligations to pay tax in the United States. [Why should New Zealand care about this?]
However, a significant portion of these tax obligations can be discounted by tax paid in New Zealand under the US-New Zealand double taxation agreement.
For these reasons, the Privacy Commissioner has not opposed the negotiation of the FATCA IGA with the US, and the amending tax law to implement the IGA.
Will information about New Zealanders with no US connection be sent to the US?
No. Only those accounts covered by the terms of the IGA can be sent to the IRS. Financial institutions have to collect information on accounts that look like they might belong to a US person, in accordance with a set of criteria.
In the 2013 New Zealand Census, 21,462 people indicated they were born in the US. This is an indication of the number of people potentially affected, as birthplace is one of the IRS criteria.
Sorry – that’s a lie.
“Will information about New Zealanders with no US connection be sent to the US?
No. Only those accounts covered by the terms of the IGA can be sent to the IRS. Financial institutions have to collect information on accounts that look like they might belong to a US person, in accordance with a set of criteria.”
Unless you are a joint account holder with a US person. There are thousands upon thousands of Americans living abroad married to non-US citizens. If like me, they share everything, including their income, in joint accounts. It is immoral to include a foreign individual’s money as attributable to the US person for the purposes of FATCA or any other monitoring/tax requirement.
The entire reason I am opposed to FATCA is just this sort of thing – it blindly tramples upon the rights of those surrounding any American living abroad, including any non-US family members.
Makes me sick . . .
Simply disgusting. I don’t have the energy to say more. All hope is lost in this American state called “New Zealand”.
@BlackPoplar, I was opposed for the very same reasons. I can’t have accounts with my Canadian spouse or child without their information being sent to the U.S. I have relinquished my citizenship since my spouse objected to having his private banking information sent to a foreign nation. He’s done not one thing wrong here except to have married an American.
IRS already looked at situations with joint accounts and decided not to change it. That left me little choice in this matter. They know in the U.S. this is happening and they do not care.
Today there is an announcement that New Zealand is among the jurisdictions that have reached IGA agreements “in substance” and have consented to being treated as if an intergovernmental agreement were actually in place…. The reason for this is obviously that FATCA won’t work without the cooperation of New Zealand and with July 1 looming, the US has declared (with the consent of New Zealand) that they have that cooperation in the form of an agreement “in substance”. I think these are desperate measures taken in a legal vacuum to avoid the chaos that will be brought about by the withholding beginning July 1. But both the US and New Zealand are guilty of riding roughshod over the fundamental principle that the people have a right to know what the law is that applies to them. A simple example of this is raised by the leaked Canadian draft FATCA guidance. What, under the New Zealand agreement “in substance”, is an unambiguous place of birth in the United States?
Why should any country bother to pursue an IGA anymore? They can just nod and say they agree “in substance” and forget about it once they’re on the golden compliance list. Since they haven’t officially signed on to anything, there will be no consequences for de facto non-compliance.
@qm…
Here is a link to that story
NZ will be treated as if it has signed an IGA until the end of the year…
http://www.fsitaxposts.com/2014/04/03/irs-extends-registration-deadline-identifies-countries-pending-igas/
Isn’t that nice of the IRS to make it easier for NZ to capitulate…?
So when I get my CLN, my country of birth is still “USA”. Will I have to write to my banks informing them of my CLN and to NOT turn over my data to the US or face legal action? Will the banks ignore this and have a right to turn over my data simply because I was “born in the USA”? Will the IRS be actively trolling through data of ex-Americans? What a sick world.
How barbaric.
The Heathens have threatened the trade routes with “access fees” and “withholding taxes” and so we must open the city gates and allow the pillagers into our Treasury unhindered ! whilst hoping and praying that since we do not resist they will take less and restrain themselves from raping and destroying our economy.
How sick !?! Saith the Barbarian Tyrants “Lift thy skirts and let us see and handle they sex and we promise not to rape you!”
Saith our cowardly Leaders “Fly the Gates ! Resist not the Barbarians for they have “needs” and have promised to treat well with us !”
I read from the Privacy Commissioner’s report that he / she knows full well that what is being done is an affront … and abrogation of the rights of New Zealanders yet in his / her fear is trying to sugar coat a very bitter pill indeed … that of abject surrender, the tearing up of the Rights of NZ residents and the opening of the NZ Treasury (GDP) to the theft of resources at the point of a “gun” called Sanctions.
The display and the stench of this fear in official quarters gives hope … for they KNOW that what they are doing is wrong ! This gives a crack into which a wedge can be driven.
@pukeonz, I’m sure that banks and financial will continue to relay data on accounts with US -indica. I have written to my building society who have admitted that they are going to be fully FATCA compliant; and that I will have to take it up with HMRC, so not their concern.
It will all be fully automated by computers. I don’t think it will be a big deal, apart from possible risks of stolen data fraud. I could sign all my cash savings solely to my spouse and only keep my investments indicated deemed-compliant government -registered accounts such as ISAs and my workplace pension. I don’t believe that deemed-compliant accounts will be reported.
@pukekonz
You should definitely write your banks a letter informing them of your non-USP status – and request confirmation! I did that and provided them all with my personal ID document. Some requested a copy of my CLN and a form W-8BEN (certifying non-USP status). If you don’t tell and prove it to them, how should they know?
If you do that, however, and the banks still report any data at all to the USA, you may have grounds for a law suit against them, depending on your country’s legislation.
My sympathies to New Zealanders. That being said, make-or-break for FATCA will be Canada and (possibly) the EU, China, Russia. New Zealanders’ best hopes at this time may lie outside NZ.
@monalisa1776, “Fully FATCA Compliant” can mean many things to a building society.
By fully FATCA compliant are they a firm with a Local Client Base and have “limited FATCA reporting?”
Could you give the initials of the building society? Or if small where they operate? Or was it NBS?
It was NBS.
@Monalisa,
Though they are large they would appear to be a BS with a Local Client Base and have “limited FATCA reporting?”
A year or so ago, they and many other building societies closed down their offshore branches in places like Jersey. At the time I wondered why but now its clear they wanted a FATCA exemption.
I have been looking at the onboarding of new accounts to see who is going hyper and who is not.
NBS is not asking the place of birth question which in my mind is the litmus test if a firm is a full reporting firm or one that has limited reporting.
I managed to find a nearby credit union which is below the asset threshold and asked them about FATCA. They also said “fully compliant” but fully compliant in that they have no requirements.
Refreshingly frank commentary from NZ if you think about it. In essence, “yes, it’s a nasty breach of privacy but heck, there’s only about 20,000 of them, so who cares? ”
All rights are relative, some more relative than others.
Does anybody following this from NZ know if NZ banks actually HAVE any place of birth or citizenship data in their normal records? That of course is the Achilles Heel of all of this – in Canada, at least, no banks have ever recorded place of birth or citizenship unless, I guess, one were to have proffered a US passport as one’s ID in opening the account (fairly unlikely for a permanent resident with driver’s licenses, health cards and the like). Brokerage accounts and life policies are about the only place where US Personhood would ever potentially have been recorded in the ordinary course, and then only sometimes.
This is pretty much what this Canadian Member of Parliament wrote in a letter to the editor of the Squamish Chief:
http://www.squamishchief.com/opinion/letters/safeguards-lauded-1.939921
It would appear that the US is touching the brakes in an attempt to gain control of their runaway train.
@Brockers. I have been thinking about “Jake” and this NZ item.
Over the next few years so many lambs are going to be handed over to be slaughtered and they will not know what hit them.
My basic premise is most with clinging US nationality do not think about it, consider themselves something else and have never heard of FATCA or do not think it affects them.
Whats going to happen over the next few years?
Joe Canadian, Andrew the Brit, or William the Dutch boy, will have some contact with a full reporting financial institute and very innocently reveal that they are a Citizen of Canada, Britain or Holland and their place of birth was the USA.
The account will be opened and they will think nothing of it. They will think its some type of enhanced identity screeining to protect against identity theft.
Their confidential financial information will be handed over to the USA without them realizing it.
Note, I have seen no disclosure by FIs as to why they are asking such information.
A couple years later the three get a nasty letter in the post from the US.
Talk about an OMG moment. There will be many suicides over this, many.
@bubblebustin, Could someone post online, how is it better or any different that the CRA does the reporting instead of a bank?
Could someone ask this MP and lawyer, where in Canadian Law is dual citizen recognized? The truth is that in Canada you are either Canadian or something else.
Again to be blunt it is racist, absolutely racist to call someone a Nigerian Canadian or a US Canadian.
John Weston writes, “In addition, CRA will not assist the IRS in the collection of U.S. tax payments if the individual was a Canadian citizen at the time the liability arose.”
If the USA passes the GOTCHA Act and imposes a 70% withholding tax on non-compliant countries that do not help collection of US tax and penalties, will Canada comply?
@bubblebustin “IBS has prevented a few (suicides.)”
I have no doubt about that.
But most expats/former pats have never been to IBS.
Many of these are going to have their information handed over with no knowledge and will find out a couple years later by getting an official letter in the post.
It is cruel that governments are not mandating disclosure as to the dangers of many investment products to US Persons and disclosure as to why some FIs are asking place of birth.
@George and @Bubblebustin, I agree that many will probably start getting nasty IRS letters perhaps in 2016-17. But what I can’t determine if these will at least initially ‘just’ be warning letters that they should be filing and reporting on these accounts they haven’t declared, or will they actually already start assessing large (+$10,000) fines for not filing? I’d imagine that they could often get the penalties lifted but will face burdensome legal fees. I’m sure the accountants and especially attorneys will be rubbing their hands in glee…
@MONALISA;
As we all sort this out, the fallout will start as you say in 2016/2017. Thats when the political fallout will happen.
Calgary411 has written before how certain financial products should contain warnings for anyone that may considered a “US person.” In this post FATCA era the various governments should insist on ample warnings especially against mutual funds.
But there also needs to be disclosure as to why a financial firm is asking for certain information and what will be done with that information. Why? Asking place of birth is rather inocuous but will be used for insiduous purposes.
Lots of people are going to be hurt and hurt badly.