NB: Please note that neither I nor any member of ADCS-ADSC, ADCT, or the Isaac Brock Society Committee support any political candidate mentioned in this article or its description. I am posting it because it contains important information about international efforts against FATCA. If you have any issues with this post, kindly contact the Brock Committee. Please avoid divisive, attacking comments. Thank you.
reposted in its entirety with permission of the author
Now That It’s Clear the U.S. Will Not ‘Reciprocate’ on FATCA, Will ‘Partner’ Countries Wise Up?
As I have warned for several years now (for example, see with respect to Europe, Canada, and Cayman), “partner” governments signing legally defective “Foreign Account Tax Compliance Act” (FATCA) “intergovernmental agreements” (IGAs) under “promises” from the U.S. Treasury Department that the U.S. would provide reciprocal information from domestic American institutions was at best a long shot, more likely just a deception. Almost three years ago, in July 2013, Florida Congressman Bill Posey made it clear requests for legislative authority to provide “reciprocity” were dead on arrival.
Yet foreign governments have continued to deceive themselves – or their publics, or both – that American participation in a global GATCA, or intergovernmental “automatic exchange of information” (AEOI), “disclosure of corporate beneficial ownership,” and a “common reporting standards” (CRS) regime, probably under OECD auspices, were just around the corner . . .
Well, it isn’t. Period. Full stop.
With Senators Rand Paul’s and Mike Lee’s stalwart block of tax treaty provisions as backdoor mechanisms for securing the Obama Administration’s sought-for authority, the matter is deader than ever here in Washington. (See “Rand Paul’s Stand against Tax Treaties Is More Important than You Think,” Accounting Today, May 13, 2016; and “Why Is the Senate GOP Leadership Helping Obama Pass Job-Killing Treaties?” Conservative Review, June 16, 2016.)
Belatedly, some elements abroad are waking up to the fact they’ve been had. They have only themselves to blame, really. Not only were they warned by this writer time and again, they at least should have had the common sense (and an elementary understanding of our non-parliamentary Constitutional system) to know that Treasury’s promises had no legal authority and were worthless. But so intimidated were they by America’s mighty threat of FATCA sanctions (which now seem ready to be unleashed, with the expiration of a two-year “grace period”), or deceived by the siren-song of the compliance industry that “there is no alternative” to an inevitable (and for the industry, highly lucrative) acquiescence to Washington’s demands, or perhaps slavering with the sheer greedy lust of an expected tax revenue bonanza (a mirage, of course) if only they would throw their citizens’ privacy concerns under the bus, our so-called “partners” – more properly called satellites – meekly handed over the keys of their financial institutions to the IRS (not to mention, to the NSA, CIA, etc.)
But still, our “partners” now pronounce themselves shocked – shocked! – that “the Yanks” aren’t keeping their promises. Since the “Panama Papers” story broke, foreign officials have accused Delaware, Nevada, and Wyoming not to disclose “beneficial ownership” of corporations. There have been calls to blacklist the United States, and even (from the Greens/EFA group in the European Parliament) to apply sanctions against us. Cayman Premier Alden McLaughlin has called for a level playing field in terms of financial transparency and stated that a standard without U.S. participation “is not a global standard.”
Good luck with that.
At this point, as our foreign partners finally notice the raw deal they’ve gotten, they have three choices:
1. Keep beating their collective heads against the wall, futilely demanding that IGA reciprocity promises be honored, that American states disclose “beneficial ownership,” that the U.S. sign on to the so-called “Protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters,” along with a follow-up “Competent Authority” agreement, etc. To which Congress in effect answers: “Yeah, you and what army?”
2. Accept that Washington will treat international information exchange like we treated the League of Nations or the International Criminal Court: those lesser, not-fully-sovereign countries will comply with whatever we dictate to them, and we will ignore their requests to us. Have a nice day!
3. Finally admit to themselves that FATCA, GATCA, AEOI, CRS, and the rest of the whole rotten OECD-Obama scheme was a bad idea to start with. They must then tell Treasury they will not comply with FATCA and will pull out of arrangements that violate state sovereignty and personal privacy – and if Treasury does attempt to impose illegal sanctions for FATCA non-compliance, determined resistance and asymmetrical responses will follow. (Granted, small countries like, say, Cayman, are in a weak position to defend themselves directly, though they could support anti-FATCA efforts inside the United States, which they haven’t. Other countries do have significant options. For example, Canada and the United Kingdom are in a strong enough financial relationship vis-à-vis the U.S. to tell Treasury that any FATCA “withholding” to their institutions will be met dollar-for-dollar with withholding from transfers to the U.S. Or Canada could inform the U.S. that an equal sum of FATCA withholding would be imposed in added fees on American air carriers transiting Canadian airspace on Atlantic flights. Let’s get creative, people!)
The bottom line is this: if there’s a will to resist, the means will be found. But if “partners” continue to cower as they have thus far, they deserve whatever they get. Based on past performance I remain skeptical that our satellites will summon the wherewithal actually to stand up for themselves. But the successful Brexit vote gives even this most hardened cynic pause and renewed hope in the spirit of liberty.
Meanwhile, at least the sense unfairness and the need to do something about it appear to be growing. The following is a survey by country of reactions to the accurate perception that FATCA is an unfair, one-way street, especially for “Accidental Americans,” who are local citizens who for a variety of reasons are considered “U.S. Persons” for tax purposes by the U.S. (Edited below, the source is Jude Ryan on the Accidental Americans group on Facebook, where the original text and further details are available.)
France: The Assemblée Nationale has set up a fact-finding mission to investigate the extraterritorial reach of U.S. laws and in particular the invidious position French “Accidental Americans” find themselves in. Several recent events have highlighted the propensity of the U.S. courts and the US administration to purport to impose sanctions against foreign corporations and foreign individuals in respect of events occurring outside of US territory. Based on the feedback of a wide array of experts, the fact finding mission will attempt to define the contours of US extraterritoriality, exhaustively identify all cases of extraterritorial application of US laws, assess their impact and in particular their impact on fair competition and the economic losses suffered by French companies as a result, and to study ways in which to counter such practices both at a national and European level. The mission hopes that its findings will lead to concrete implementation measures. A hearing of French “Accidental Americans” was held on 8 June 2016 and at which issues raised by FATCA and the US practices of Citizenship Based Taxation, particularly as regards “Accidental Americans” were discussed. The mission questioned and heard testimony from five accidental Americans. Also, French Parliamentarian Seybah Dagoma wrote to the President Hollande’s office drawing his attention to the issues faced by French citizens who are also Accidental Americans. In her letter, Ms.Dagoma denounced the unintended consequences of FATCA, the absurdity of Citizenship Based Taxation, the extraterritorial reach of U.S. laws and the living nightmare French Accidental Americans and their families are enduring.
Italy: Massimiliano Fedriga, leader of the parliamentary Lega Nord group recently posed a question to the Italian government regarding the situation of Accidental Americans and in particular how the Italian government proposes to safeguard Italian citizens caught up in this mess (in addition to questions regarding infringement of Italian sovereignty, compliance costs and related matters). Senator Comarloi for the Lega Nord is apprised of the situation and is also looking into this and Matteo Salvini (member of the Lega Nord and fellow MEP) has also been informed of the issues.
Canada: In Canada, the Alliance for the Defence of Canadian Sovereignty has initiated a lawsuit against the Government of Canada legislation that enables the FATCA IGA “agreement” between Canada and the United States. The Defendants in the lawsuit are Canada’s Attorney General and Revenue Minister. The Plaintiffs are two women from Ontario, Canada, both born in the United States, but who left the United States at an early age and have no meaningful ties with United States — yet they are deemed by the United States to be “tax citizens”. The Plaintiffs Claim that the legislation violates Canada’s Charter of Rights and Freedoms, Constitution, and it sovereignty as a nation. The trial is likely to take place in Canada Federal Court later in 2016. Plans are also afoot to mount a legal challenge in the US courts to the US practice of Citizenship Based Taxation.
Israel: Two actions are ongoing in Israel. The first is an appeal to Israel’s Supreme Court, contesting the right of banks to transfer information pertaining to local accounts of dual citizens to the IRS. If this appeal is successful, the problems of accidentals will also be solved. The second revolves around banking problems faced by the many small charities popular in Israel’s ultra-Orthodox communities. These charities rely on foreign donations. Requiring them to report on all donators will effectively ruin them. This issue is being discussed by the finance committee in the Israeli parliament. This committee also promised to discuss the Accidental Americans issue.
It still remains to be seen where these efforts will amount to anything serious. Likewise, even if they are, it is essential they are directed not towards pulling the U.S. into the financial fishbowl – which I repeat again for the record, just will not happen – but for scuttling it entirely. In that regard, it’s belatedly time to create what never has existed from the time FATCA was launched in 2010: a dedicated, funded Washington-based lobby and media effort to repeal this misbegotten, wasteful, invasive, and dysfunctional law.
Jim Jatras, [email him] is a former US diplomat and foreign policy adviser to the Senate GOP leadership.He is a supporter of Donald Trump. Jatras comments on financial and foreign policy topics and on U.S. politics in his publication www.RepealFATCA.com and www.jimjatras.com. Tweet him at @JimJatras.
So maybe the credit unions are exempt because they’re non-profit, or have a local tax base.
I think it’s Tim who floated the possibility that a Canadian judge might just exempt Canadians and PRs from FATCA reporting – which was suggested the Harper government do during the SCF meetings in the lead up to the IGA’s passing here in Canada.
The US would then have the choice of whether to go after Canadan grandmothers or not.
@Bubblebustin – that would be great, but why would the US agree to that?
Because maybe by then the US will realize what a debacle FATCA is?
Re: “An offshore bank in Belize, owned by prominent UK businessman Lord Ashcroft, has seen a sharp outflow of deposits following a US crackdown on tax evasion.”
It doesn’t seem to be getting any better.
…There is no IGA with Belize. Therefore, the bank could simply sell off its USA holdings and eliminate its FATCA risk. That’s what they should do. This would also mess up international transfers when there is no correspondent bank in the USA, but the investor could clear payments through another bank in Belize, then transfer the money through the central bank, which is exempt from FATCA.
For those who don’t know it, USA goes after money laundering that happens in foreign countries, and busts the bankers if they enter USA. It’s basically the same legal theory that says, if you phone in a bomb threat, you have committed a crime in the place where the threat was received. If you phone in a bomb threat to a bank in the Banana Republic of Lower Bongo Bongo, you are subject to imprisonment there, under their laws. Likewise, USA applies its anti-money laundering laws when the bankers send the money to the correspondent bank in the USA. The legal theory is that part of the laundering happened in the USA.