From Life Behind the IRon Drape, a blog by Mark Hubbard which critiques New Zealand’s IRD (Inland Revenue Department):
FATCA: The (NZ) Officials’ Report – A Crime That Deserves a Revolution
Here is an excerpt from this powerful evisceration of New Zealand’s new tax policy report heralding that country’s own IGA with the US:
Yesterday IRD Tax Policy published a 310 page document, part of which was the officials’ response to the IGA between NZ and the US, and FATCA, and the submissions made against both by the public. That report becomes a good object lesson to all submitters of what a whitewash such exercises are, and what a sham our statist captured democratic processes have become. The report proper started at page 112 of the document: it is sadly unsurprising the first 111 pages dealt with what you might have thought was such a simple thing as how employee allowances are to be dealt with (such is the complexity of our taxing legislation). Although I could only make it to page 117 before my eyes were so blurred with tears of fury, and I had no interest in reading on, even in these five pages, look at what this report says about our society, and our world, in 2014.
New Zealand tax officials have just confessed, quite casually, to the creation of the full, one-world police surveillance state under the auspices, sorry, the outright bullying, of our US masters.
American tax grab may target Kiwis
Last updated 05:00 24/02/2014
“Kiwis could be forced to surrender their private details to United States authorities as part of a deal to combat tax-dodging.”
– © Fairfax NZ News
Yep, this world has gone insane. Quite literally the Devil personified as the beast with 7 heads and ten horns in Revelation is making its last and final move.
The Draper article includes:
The legal options used by Canadians include arguments based on Canada’s Charter of Rights.
This post is published on April 17, 2014 which is the 32nd anniversary of Canada’s Charter of Rights.
Here is an Isaac Brock post on the 31st Anniversary of the Charter:
Here is an Isaac Brock post on the 30th Anniversary of the Charter:
Prime Minister Trudeau’s Charter of Rights is NOW being used to attempt to defend Canada against the United States as confirmed in this recent post:
There are good arguments that the proposed legislation infringes at a minimum on constitutionally protected rights and freedoms. Nevertheless, there are also arguments that the Government of Canada may employ to counter our position and, we emphasize, there is no certainty that litigation will be successful. Further, any litigation will be hard fought and very expensive. This litigation is not for the faint of heart.
@USCitizenAbroad: I think this comment is in the wrong thread.
@Osgood, it does tie in to that the world is now turning to Canada after the fall of NZ. And is a good primer on the Charter.
Lastly thanks to all in NZ that stood firm and at least forced the government to admit they were throwing certain NZ Citizens under the collective bus.
Personally, I found this article more enlightening on what New Zealand, and other national governments, might be hoping to get from FATCA: the increased ability through GATCA to crackdown on their own citizens who claim to be resident elsewhere for tax purposes but have maintained considerable economic ties to the country of their citizenship. See in particular the very informative KPMG comment.
This is a political problem that has increasingly attracted popular attention here in Britain, so I can see why it would be attracted by the idea of throwing its U.S.-person population under the bus as it were to strengthen its hand against British billionaires heading up British business while claiming tax residence in Monaco and other havens. Ironically, London is a major destination for wealthy tax exiles, including those from Canada, although this role has become controversial because rents are astronomical. The UK tax authorities have already used the U.S. FATCA as a lever to pry open many of the tax havens in their own bilateral deals and seem interested in untaxed foreign earnings.
Knowing the motivation of national governments matters a great deal. If national authorities are deluded, that is one thing, but maybe they aren’t.. Yes, the U.S. gets more than others, but other countries may be hoping to benefit by taking a page out of the U.S. book.
People must take a hard look at exploiting the weaknesses in the KYC systems the banks use by using shall we say FATCA friendly documents to regain your financial freedom.
If we don’t get ‘carve outs’ for resident citizens of each country the day will come when you be providing biometric data to banks (photo, fingerprints, etc) just to open a stinking bank account.
The Kiwis need to realise that FATCA is not ‘future proof’ and the US can change the rules at anytime. That’s the real danger.
We can only hope the US Dollar is de-throned as the sole reserve currency soon to weaken FATCA. If you don’t have to use USD to buy oil and other commodities, FATCA is weakened considerably just like the US will be in general.
Everybody runs scared of the USA!
“As a side note, the Canadians are looking at their legal options over IRS’s assumed ability to impose penalties on non-US banks which don’t comply with FATCA: good on those Canadian politicians.”
While several opposition MPs have stood up in the House of Commons condemning the omnibus budget bill and the inclusion of the FATCA IGA therein I don’t believe any Canadian politicians are investigating Canada’s legal options with regard to FATCA. It is ordinary, frightened and irate Canadian citizens, left by their government to fend for themselves, who are making this legal inquiry. Or have I missed something?
I don’t understand what you are saying. It seems to me you are contradicting yourself when you talk about biometrics. What I mean is, won’t your suggestion just be a temporary fix?
I guess I am back to ‘waffling’ again.
@muzzlednomore – consider a simple example.
Bank of Montreal (Toronto) enters into a swap agreement with Bank of America (New York) under which BMO agrees to pay BofA interest on a fixed sum at a floating rate while BofA agrees to pay BMO at a fixed rate. This is a bog standard hedge transaction enabling one bank to hedge the risk of floating rates – banks do transactions like this in billion dollar increments every day in order to keep their risk profile exactly where the number crunching quants tell them it should be (leave for another day the role such instruments played in the crisis of 2008; these ARE fairly normal and standard transactions). Variants on the theme will involve different currencies – I’ll pay you fixed rate in C$ and you pay me floating rate in US$, etc. Now imagine that US Treasury declares BMO to be a recalcitrant financial institution and thus directs BofA to withhold 30% of all payments to BMO and send those payments to the US Treasury. Ask yourself – what payments do you think BMO is going to make to BofA on its end of the deal? I vote “nil”, or at least a 30% withholding to compensate. Thus, when the dust settles, the Bank that ended up paying the US Treasury is…you guessed it, B of A. My example is a little too simple since BMO has an office in New York, but I don’t believe that would stop its Toronto branch from retaliating against B of A for withholding if indeed it didn’t seize upon the excuse to terminate any transactions with B of A that it didn’t like because the market had turned against them. BMO as PAYER might find itself in BofA’s shoes were it to have a deal with Bank of Brazil out of its NY branch. That is a more exotic twist, I admit.
The point being that the US – and US law – does not control both sides of every transaction in the financial world and just because the Treasury tells an FI to withhold does not mean that the withholding is not a breach of the agreements of the FI’s in question with counterparts all over the world. When the US Banks are serially in default of thousands of agreements because they are trying to follow US law which does not necessarily govern both sides of their transactions, chaos breaks out and the US is not a winner in that scenario. Jatras has written about the prospect of the US Government defaulting on T-bonds – could happen, but I rather doubt it. If I were a Russian or Chinese bank with some of those bonds in my portfolio about to receive a payment, I’d just swap them out with my friendly neighborhood, FATCA exempt state-owned bank and avoid the trouble entirely at nominal cost. That much is child’s play, if a bit awkward and bothersome. Canada’s ties with the US are likely too complex for such a simple work around to impact more than the margins, however.
I’ll make it a little more interesting for you – a great number of these types of contracts have clauses in them according to which a payer is bound to pay MORE if there is an adverse change in tax law. In other words, many agreements require the obligor to indemnify the payee if there is a change in law that would alter the economics of their agreement. Therefore, were there to be a 30% withholding on payments out of America, Americans might in some cases be obliged to increase their payment to compensate. Again, Treasury 1, American business 0.
In my humble opinion, people have not thought this thing through far enough to realize that in many cases, the US has aimed the gun at its own head in an outrageously silly Blazing Saddles bluff moment. Faced with the Sheriff pointing his pistol at his own head, the rest of the world seems to be standing still saying “OK, don’t pull the trigger”.
I don’t want to minimize the fall out to the rest of the world – there would be plenty as well. I’m just pointing out that the victims will be on all sides and it would take a pretty detailed review of the economics of world trade to conclude exactly where the greater number would lie. I can guarantee you that US Treasury conducted no such review when FATCA was dropped into the HIRE Act in 2010 in the dead of night. I see no reason to assume that US financial casualties would be slight and that is before world governments get imaginative and create retaliatory measures to defend themselves by holding hostage US investments overseas in proportion to US attempted hostage-taking of foreign investment in the US (a great deal of which is in the financial services industry given the predominance of that industry in the US and the predominance of the US in that industry).
As well, while the shift away from the US dollar as reserve currency will not take place overnight, do not think that this episode is not putting the movement into high gear. The US inherited that role in 1945 because its undamaged economy was almost half of world GDP and no other economy could come close to fulfilling that role. In the 70 years which have followed, the US share of global GDP has steadily slipped (as it was bound to) while its currency has retained a broadly similar level of predominance in world trade. That can and will change and regress somewhat closer to the mean. Between Fed printing presses and inadvertent but stubborn Congressional bone-headed fiscal imperialism, the world is no longer seeing the US as a bastion of stability and rule of law upon which world commerce might be based. Its currency is debased routinely and its laws are increasingly erratic, chauvinistic and unreliable. These are slower processes to unfold, but the cost to the US of this misadventure will be large and will be paid over decades, long after FATCA is forgotten.
FATCA is like the Austrian ultimatum to Serbia. The world’s options are not limited to World War I or allowing Austria to all but annex Serbia and, the US has no natural allies in this game of brute force. I actually think Canada has a chance to play a very positive role in helping save the US from itself by gutting this beast cleanly. By protecting its own tax residents – if necessary by Court ruling – Canada will give the US an opportunity to recognize that their blind defence of CBT is doing much, much more harm than good. Their choices will be to abandon it (not likely, I’m afraid) or retreat to the world of ten years ago which was effectively “don’t ask; don’t tell”. They would collect CBT and make half-hearted attempts to enforce it only when they tripped over it. US Treasury has been gloating over their “agreements” with the rest of the world, implying they have “set the new global standard”. The new global standard – if there is going to be one world Big Brother out there (another topic) – will be based on RBT not CBT and Canada may help the US climb quietly on board if they want to (I doubt they do – the US is not exactly setting records in implementing reciprocity because they make a good living gathering in money from “fat cat tax evaders” in less stable countries).
Sorry for the essay – at least this one was passably on topic!
I am curious what you think of the situation where someone renounces, but has never filed, and does not file, but is only interested in getting a CLN as protection from reporting by the banks (lets assume that the banks either do or will find out that this person has US indicia thus the CLN will likely be required to avoid FATCA reporting).
@WhiteKat – Personally, I have told relatives to simply stay off the USG radar No passports, no letters, no nothing. That is not as easy for those with passports, SS numbers, work history in the US etc I admit. If you renounce, they now have a file open with your name on it. They may be inefficient and do nothing. Indeed, the more people that renounce, the more likely they are to do nothing because too much paper to push, but I am disinclined to kick a sleeping dog.
While a CLN is a pretty piece of paper to show banks, consider that (a) banks are – at least under current rules and draft guidelines – not going to be asking any questions deeper than “are you a US Person” to which anyone with an expatriating event in their back pocket can simply and forthrightly answer “no”. Were you to want a pretty piece of paper for the banks (not the USG) to look at, you could get a lawyer to do a simple declaration of expatriation including – for good measure – a repeat of your citizenship oath of allegiance to the Queen. That ought to impress any bank – I suspect the USG would ignore it though.
Canada has made it clear that lip service is all that is on offer here – as long as potential US Persons don’t lie in the middle of the road, I don’t think many will be run over. I repeat as always – the law is a bad one and we are collectively right to stop it in its tracks because there is no telling where they will take it later if they get their foot in the door.
As for CLN’s – everyone has to make the tough call based on their own facts and comfort level. Where compliance is possible, some have chosen to do it.
For anyone who has lived their whole life in Canada, I can confidently say that compliance with the IRS mad-house rule system is simply not an option. The outcome would be equivalent to saying “here is my house, my retirement savings and everything I own. Take what you think you should, please try to leave me something so I can feed my family”. Where the alternative is to stay clear of the US for life (at worst – not required now since I have never seen any difficulty crossing the border with a Canadian passport and US place of birth; that could, of course, change in future), the choice is not that hard. It’s not the tax (which is bad enough) – it is ten years of FBAR’s and related “form torture” that gives them the unfettered right to confiscate virtually anyone’s net worth. Just look at yesterday’s thread about gathering pension and FBAR data to fight them on PFIC’s. A nightmare. I hear those who say that the penalties are unenforceable in Canada and unconstitutional in the US. Easy enough for an Edward Savarin who can litigate for 20 years with his walking around money. Our group shall be hard pressed enough to fight one discrete court battle on the Charter challenge.
What would you say to someone who would someday be getting a US inheritance, and therefore a US wire transfer (over 50K) to their bank?
Yes I agree compliance is not an option for many…way, way too complex and expensive. How to deal with the US problem seems to be for many, myself included, an exercise in guessing (and attempting to forecast the future) which is the least worst option.
I agree, muzzlednomore, that his comment concerning the efforts being made by “Canadian politicians” may leave the wrong impression that our government is looking at legal arguments against the IGA. Furthermore, those in government who would be looking at legal arguments don’t need guts to oppose FATCA, as they consists exclusively of those who voted against it. Where NZ’s reigning government did have guts over ours was in admitting that it’s throwing its citizens under the bus for what they say is in their country’s best interest. Maybe they’re just not as wise as ours for admitting so.
“I would point out that an inevitable part of this IRD ‘electronic’ screening process will be IRD officials looking at all these individuals closely, so opening the prospects of many lovely fishing trips for them.”
It would seem that the IRD and CRA have a value added benefit to the seizure of information from our target group – unprecedented levels of information otherwise unavailable to them without an IGA.
I really enjoyed you “essay” especially your reference to Blazing Saddles, one of my husband’s favourite movies. Although it’s not funny what the US is doing, we think they’re serious!
@ Anne Frank. No need to apologize, that was an interesting quick tutorial into a world most of us are only dimly aware of. Aside from the disruption to a world financial system which mostly works pretty well, FATCA has one major built-in flaw. The US Treasury Dept. heralds these IGAs as understandings between “partner’ countries. They actually bear more resemblance to the “protection” arrangements a Mafia gang might impose upon local businesses.
The long term effects of such forcible tactics will come back to haunt the US government. We here in Canada know only too well how unreliable a partner the US is with any sort of agreement. The US throws its weight around during the negotiation process and then, if an agreement is reached, will promptly renege on that agreement if it suits it. The US enjoyed a surge in worldwide good-will after 911 which they have subsequently squandered. And then they ask themselves “why do they hate us”!
WhiteKat, the inheritance is not relevant. In the US, it is the estate that pays any death duties owing. Since their is a 5.25 million lifetime exemption, most estates owe nothing. Once the executor has clearance from the proper authorities , he can distribute the estate to anyone specified without further ado. He could send 50 k to the man in the moon if that was in the will and there would be no consequences.
@Kalc, Thanks, yes, what you say matches my understanding. However, my concern is about the US indicia that is uncovered by the bank receiving the wire payment on behalf of the hitherto undiscovered ‘US person’.
@KalC. An inheritance exiting the US to a beneficiary doesn’t seem to be a problem, even if that beneficiary has lost their US citizenship. The problem might be when that ex-US citizen beneficiary dies and tries to leave that money to their beneficiaries if they happen to be back in the US. The US apparently has some funny rules (and tax) about repatriating money when the estate is of someone who has renounced their citizenship. Its hopefully some years down the road, but this is the situation I (i.e. my executor and heirs) might find themselves in. One solution might be to disclaim all or part of the original inheritance and never take the money out of the US in the first place. I suspect this is the reason these rules exist.
There are no indicia uncovered. Estate A wires 50K to heir B in Moose Jaw. From the point of view of B’s bank in Moose Jaw- so what?
@KalC, I hope you are right. I opened a simple savings account at a credit union recently and moved under 50K into it. They asked me where the money came from and why I was opening an account there. I can just imagine them asking similar questions for a largish wire transfer from the US. If I told them it was an inheritance, then it would not be difficult to put 2 and 2 together, and inquire if I was a ‘US person’. Then what?
I find this quote interesting:
“Inland Revenue’s proposed technology solution for IGA information will result in data transferred from financial institutions being electronically screened to ensure it complies with minimum requirements. From the 2017 reporting period, one of the required data fields will be the US social security number (called a TIN for tax purposes and essentially an IRD number equivalent) of the relevant person. A person that is not a US taxpayer will not have a social security number. So, even if a financial institution did try to report on a non-US person, the data would be rejected by Inland Revenue systems as being incomplete.”
My question is: How will a financial institution or the IRD obtain a US “taxpayer”‘s social security number (aka Taxpayer Identification Number, or TIN)? Canada’s Inter-Governmental Agreement with the U.S. stipulates a $100 penalty for an individual’s failure to provide such a number, which is not a high price to pay for privacy. Can a bank refuse to do business with someone who will not report a U.S. TIN? Will the government of New Zealand or of Canada penalize a person further for refusing to divulge such a number if they are suspected of being a U.S. person for IRS tax purposes?
Sorry, “IRC” should have been “IRD”.
WC We are way off the New Zealand thread here so I will shut up after this. You are letting your imagination run wild. Banks are required to ask why someone is sending money. The answer can be simple. “it’s a gift” ‘it’s an inheritance’ and so on. BFD. Once the bank asked why I was wiring $ to Barbados. It was for a condo rental – ‘thank you’. If you were to try to send 50K to Nigeria, they would be acting in your interest to try and stop you.
They ask if you are a US person? Nancy Reagan had the answer-‘Just say no’
@Whitekat – What I’m saying is yes it’s potentially a quick fix, but are governments around the world prepared to take the next step and allow biometrics in a bank? Or will people start rebelling against FATCA in a way that local governments will have to start listening?
Yes if you have a second passport you could change your name by deed poll, get a new second passport and go find someone to clone the new one. Without biometrics you could successful bypass FATCA for now or at least make it tougher for the USG to track.
The USG would have to start exception reporting by persons without data flow or try to get ‘everyone’s’ data from the whole world, but each has it pluses and minuses for the USG, but one thing is sure it’s more work for the USG.