60 thoughts on “The Looming FATCA Iceberg”

1. Well…77,000 sounded like a large number until it was laid out baldly in that graph…This certainly shows that the emperor has no clothes!

2. I think that with the dollar as the number one reserve currency in the world, America would have this kind of power anyway. ( Of course FATCA makes it more applicable.) I`m guessing that the answer to the riddle is for another currency to rival the US dollar. That might be the only thing to put this horror into a more normal perspective. No one country should have absolute power over all the rest.

3. From what I have seen in what I have been able to read of the FATCA articles, people in the countries that don’t have an agreement in place are really beside themselves at the moment. Some countries are very dependent on remittances from the U.S.: El Salvador and Guatemala get over 10% of GDP in remittances, around 90% from U.S. It seems like a lot of U.S. persons from hotter countries go back in the winter (very common among Filipinos) or to retire. Some of these national economies are so dependent on the dollar that I don’t see how they are going to make it if 30% is taken. Some of them are not really making it now as it is. I am not sure that I have seen any FATCA articles from African countries. At least one country on the list has a fully-privatized pension system that could count as a foreign trust in the absence of an IGA.

4. Pingback: #FATCA – A US law to keep the poorest nations poor | Citizenship Counselling For U.S. Citizens in Canada and Abroad

5. While withholding starts July 1, Reporting for 2014 accounts isn’t due until March 31, 2015.

6. To be fair there does seem to be a continual stream of countries signing IGA’s daily.
   Our hope that the US government pushed to hard this time with it’s bullying but if they get enough counties they win. I guess we could quantify that by analyzing the trade deficit with that country. This will tell you the number of US dollars that have to be invested by other nations in treasuries each month.
   The question becomes can those dollars get to places that don’t get hit by the 30%. This would include countries that have an IGA and the availability of grandfathered treasuries.
   So how many dollars go to counties not signed up vs. those that are? We know China is the big guy for dollars and not signing up.
   We might be able to get a sense of what’s going on by looking at the spread between a grandfathered treasury and one that’s not after 1 July.
   This is really exciting.

7. Nothing short of an act of war against the rest of the world.

8. All they know about tax evasion could be summed up with one statement. There are millions who have taxable incomes and have never filed a tax return. The marxist Income Tax (Marx called for a progressive income Tax in the second chapter of the Communist Manifesto) is the most evadable tax ever devised. It is a tax that the honest people pay and the dishonest evade. The U.S. Tax code is 77,000 pages of gobble degook, cobbled together to garner the maximum campaign contributions for the congressmen and women on the House Ways and Means Committee. None of them understand it and more committee chairmen have gone to jail for criminal conduct than any position in the congress. Those who didn’t go to jail left congress in disgrace just ahead of the Lawmen.
   If it were not for campaign contributions we’d have had the FairTax 15 years ago when it was first proposed. I am old and the FairTax may not make it in my lifetime but it will be the one thing that saved the U.S.A. from a Communist dictator’s iron fisted IRS.

9. I hope this starts “financial world war 3” with the USA. Canada has caved in to terrorists. Yes, the USA ARE TERRORISTS and need to be stopped. Russia can set a precedent here along with China. I never thought the USA would wage war on the world, but it has happened…

10. @ Deckard1138
    This is a compelling analysis! Especially the 2nd pie chart.

    Suggest everyone email a link and follow-up suggestion to “The Economist” magazine – this is right up their alley.
    http://www.economist.com/
    email: letters@economist.com

    Or tweet it to the Economist:
    https://twitter.com/TheEconomist

11. The USA is indeed looking (and acting) more and more like a totalitarian state. It’s somehow fitting that the IRS has recently issued its “Bill of Rights” for taxpayers. The worse a rogue nation gets, the more reliant it becomes on propaganda and hollow phrases like that. It wouldn’t suprise me if Obama got re-elected with 99% of the votes. (Please refrain from any silly references to the US constitution which would prevent him from running again, the USA is far beyond giving any weight to that old scrap of paper.)

12. the distribution of non-IGA nations is much like the old North-South divide of the1960’s and the non-aligned nations of the cold war era. Add China and Russia to form a vast trade area ripe for the creation of a de-dollarized Trade Association which uses the Yuan and Euro for international contracts. Much of Europe and the Mediterranean region could form an another overlapping de-dollarized trade association. Canada should push for the use of other currencies for settling trade accounts in all free trade agreements including TPP and any agreement covering the Americas. The US claims all trade in dollars passes through the port of New York and subject to US regulation. The US accounts for only 20% of international trade, there is no rational reason that 80% of world trade to be subject to US law.

13. I’ve been working on this post for a number of days now and just saw Allison Christians’ excellent pictorial article, “The World According to FATCA, In 3 Maps”. I’ve provided links to it in the additional references section of this post. Seems we’ve been working in parallel to visualize the same data set and we both came to similar conclusions – that FATCA will disproportionately affect the world’s poorest nations.

14. Robert Stack is nuts. Strong international support? The USG puts a 30% sanction tax to everyone’s head threatening to pull the trigger and 77,000 FFIs caved in before 1 July 2014 and he calls that ‘strong internaitonal support?’ It’s more like blackmail in my book.

15. BTW – regarding The Economist and their observations:
    take a look at http://econ.st/1iqzeaV

16. Deckard: I agree with Wondering. Your charts expose chilling evidence of what the USA is actually up to and they should be published in the Economist and every other reputable financial publication. The millions of words which have been expended on this subject have not succeeded in stopping the FATCA juggernaut. Perhaps it’s time to start throwing pie (charts) in their faces!

17. Don: You’ve hit the nail on the head. That’s exactly what FATCA is … blackmail!

18. Thanks for this telling analysis, Deckard!

19. i wonder if there’s any way to play the market volatility that FATCA will generate in the 73% of jurisdictions that the US Treasury will rape come July 1.

20. @groucho

    Lol! You bet if there is, the Americans are in on it! A lot of moving parts here though.

21. I believe the USG will play it this way. They’ll say FATCA is now implemented, but delay the 30% sanction tax to avoid upsetting the 73% of jurisdictions that have not signed up to FATCA.

    Does the IRS even have the infrastructure in place to handle all these banks filing returns to get their money back? I doubt it. I think it’s going to be a case of the USG saying we really really really really it this time!

    Like it was said in an earlier post, the best way to get rid of a bad law is to enforce it. If they start taking the 30% it’s going to cause a lot of resentment and hatred towards the USG and accelerate the process of bumping off the USD as sole reserve currency.

    One only has to look at how the USG has treated Canada, the $10B fine fiasco with France, and now the USG is going to start confiscating FFI’s money? This is how the USG treats their friends?

    Goodbye New York and hello more friendly financial centres in the world not using USDs. Hey even Expedia is going to start accepting BitCoin. How about trading stocks in BitCoin?

22. The following paragraphs are extracted from a marketing email by a Deloitte Tax Consultant (as might be expected, Deloitte is selling attendance at a webinar where a panel will discuss these issues):
    _____________________________________
    Beginning July 1, 2014, U.S. taxpayers that make payments to foreign persons are required to analyze and report information regarding payments both to foreign financial institutions and non-financial foreign entities (NFFEs) under the Foreign Account Tax Compliance Act (FATCA), which was adopted as part of the HIRE Act of 2010. To date, the impact of these rules on foreign financial institutions has been widely discussed, but the rule’s broad impact on NFFEs has received less attention.

    The FATCA provisions—Chapter 4 of the Code (§§ 1471 et. seq.)—may require 30% withholding on “withholdable payments” to foreign entities that have not provided an appropriate withholding certificate (such as Form W-8 or W-9) or other acceptable documentation. Withholdable payments include payments of U.S. source FDAP income (basically, all gross income other than income from the sale of goods), and in 2017, gross proceeds from the sale or disposition of assets that produce or can produce U.S. source interest or dividend income. However, there are broad carveouts that apply to many payments made by NFFEs, including interest and OID on short-term obligations and payments for the following: the use of property, office and equipment leases, services (including wages and other forms of employee compensation), software licenses, freight, transportation, and interest on outstanding accounts payable arising from the acquisition of goods and services.

    The withholding tax may apply whether the foreign entity receives the payments as beneficial owner or as agent for a client and whether the beneficial owner is a U.S. or foreign person. The withholding tax applies to many items not otherwise subject to FDAP withholding (e.g., portfolio interest and capital gains of foreign investors) and cannot be reduced or eliminated by treaty.
    ___________________________________________________

    Please note the final sentence regarding Treaty effect … or lack of effect …

23. i just send a link to Patrick Cain of Global, who published a story in April (using several of us Brockers as examples), on How to Get Rid of your US Citizenship. He likes charts and maps!

24. On this page, please fix the link to the 3 maps. I have been able to see them by clicking “are amongst the poorest and least-prepared in the entire world” in the text but not by clicking “The World According to FATCA, In 3 Maps” at the bottom of the article.

    This is REALLY important information for us all to communicate to anyone, especially news (TV, NPR, magazines) and other organizations (such as world health/education charities/aid programs, religious organizations, churches/synagogues/mosques, etc ) who are +++ concerned about the needs of impoverished nations – – they probably have NO IDEA this bomb is about to drop and are about to have an OMG moment (or, more likely, 257 moments).

    Anyone interested/willing to join me a coordinated emailing of this article + a FATCA Fact-sheet to such groups (in Canada? In Europe? In Australia/NewZealand? Elsewhere?) additionally providing links to IBS and ADCS-ADSC?

    I’ll start with Rabbis across Canada., mentioning also that they should let their US-connected congregants/friends know about this government-approved move to legally-established 2nd class citizenship in Canada (with special “rights” of invasion of private financial and personal data to be forwarded to the Orwelian-invader-country for further scrutiny and possible further search/seizure/punishment…….).

25. Fixed the link. Thanks for catching that, LM — this is a terrific post, really great idea to distribute it widely.