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?
Jim Jatras
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.
Just the article I want to send my MP. Canada’s IGA comes up for review next year and they need to grow some.
So, no more commenting allowed at Brock then?
Oh, I get it. No divisive, attacking comments on THIS post.
What about the ‘lying post’? It was a pretty divisive topic with lots of divisive comments, and maybe even some attacking comments depending on who you ask. Is it still OK to say whatever over there? Maybe we need that red, blinding, highlighted verbiage at the top of the post here to also be put at the top of posts where we have to be more careful what we think and say with regard to the post. That way there will be no confusion.
I`m guessing number 2 will be the order of the day – tragically. Only when the rest of the world does not need America`s economy as their motor will they tell America they refuse to play along.
Otherwise they would have done so sooner – maybe even before implementation of FATCA. Switzerland didn’t even ask for reciprocation.
In my opinion, this is all about respecting international laws and a nation’s sovereignty when it’s own citizens are resident in their own country. Extraterritorial judicial reach has begun to be exposed along with the unauthorized “Over Promising and Under Delivering” of FATCA, IGAs standard reporting schemes,….
Time to put pressure on the Canadian Government, and others where you live, to renegotiate respective IGAs in light of the developments.
@All
Re “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,” a reader (who wishes to remain anonymous) has sent me the following suggestion of how Canada COULD retaliate against the US for FATCA and demand its repeal, or at least Canada’s exemption.
I will leave it to others as to how feasible this would be. But the basic point is that if Canada is being forced to submit by the US Treasury Department’s naked threats to scuttle the Canadian financial system, it’s appropriate to consider asymmetrical as well as symmetrical self-defense. The important thing is that Ottawa needs to decide it won’t be bullied. I am skeptical that Trudeau will be any more open to that than Harper was, but I have hope. Maybe if the ADCS-ADSC lawsuit succeeds in knocking down the US-Canada IGA, Ottawa will reluctantly conclude that submission is no longer an option legally and will be forced to fight back.
Here is one idea:
Considering each Country’s scope of dis-proprtionate leverage, Canada could use its unique Sovereign gift from geography and history to retaliate against FATCA with something like CATCA (“Canadian-Airspace-Transit-Control-Authorization”). I came up with this CATCA idea — basically from just looking at a map.
International civil aviation agreements notwithstanding, my concept is not about banning any particular aircraft — but simply mandating a no-fly list for individual persons who are employed by an increasingly unfriendly American Government.
FATCA is a blatant US extra-territorial legislative over-reach, that has been put into effect by means of US coercion — using its “800-Pound-Gorilla” dominance of the world’s financial system.
When eventually challenged in a WTO (World-Trade-Organization) Tribunal, FATCA will be condemned as a Protectionist measure — and sanctioned accordingly. But in the meantime, FATCA is causing havoc around the world — and especially in Canada.
I can think of only one arena where Canada has dis-proprionate leverage over the US — namley its sovereign airspace through which most northern hemisphere intercontinenal flights must follow their great circle routes. The Canadian Parliament (or maybe just the Prime Minister on his own Executive Authority) could enact a CATCA which, while still allowing unhindered flight through its airspace, would create a FATCA-like logistical nightmare and hugely expensive administrative burden for the US.
(1) The object of CATCA would be to ban all US Government employees (at the National, Regional and Local levels) from transiting through Canadian airspace (as passengers and crew) between the US and any country other than Canada itself. (In other words, they could still fly between Canada and the US — as well as within Canada). And incidentally, such a ban would include President Obama and Air Force One.
(2) CATCA would require the US State Department and its Embassies around the world to “vet” everybody prior to flying on any aircraft that transits Canadian airspace — and pre-certify (like with a passport stamp of limited validity) that the individual is not a US Government employee.
(3) Before any aircraft takes off on a flight which will transit Canadian airspace, the Captain would electronically request permission from Canada — after declaring that there is nobody on board without a valid “vetting” certificate from the US State Department or its overseas Embassies.
(4) On a periodic basis, the US State Department and every aircraft operator would have to undertake an appropriate audit and certify under oath that they have faithfully abided by CATCA.
(5) CATCA could provide any number of reasonable exceptions — for example, allowable Military and Humanitarian missions.
(6) Canada will repeal CATCA when the US repeals FATCA and relents on its insulting treatment of a visiting dual-national like Boris Johnson — which is an anachronism in today’s world of modern democratic enlightened countries (of which the US claims to be the premier such nation)..
My CATCA proposal is both symmetrical and at the same time asymmetrical: On the former criterion, it is a like-for-like in terms of a huge cost and administrative headache — while on the latter criterion it is a case of David VS Goliath playing to their respective but very different strengths, namely Canada’s Sovereign Airspace (crucial to inter-continental overflights) VS America’s total domination of the world’s financial system.
.
Furthermore, this CATCA concept is fully consistent with the bedrock principle of all International Relations, namely Reciprocity and Retaliation (R & R) — as in You Do FOR Us / We Do FOR You and You Do TO Us / We Do TOYou.
CATCA! Love it. Too bad we have to win a lawsuit to have any chance of implementing it.
Too bad that it couldn’t be a “no-fly” zone for all US aircraft. @Jim Jatras, but the US would suddenly turn the heat up and cause a war between the two nations. And we all know how that would go down.
@Jim Jatras: Why hasn’t the GOP introduced legislation into Congress that would end FATCA and CBT?
Cross posted from the Trump satire article;
@Jim Jatras
I am neither a Democrat nor a Republican. Previously, I was an American, born and raised in the cradle of liberty, Boston, Massachusetts. Unfortunately, my birthright was stolen from me by the toxic combination of FATCA and citizenship based taxation. Now I am simply a Canadian. My wife hasn’t renounced her USC yet but thinks about doing so every day (with great reluctance).
On my side of the family, my Irish grandfather gained his USC by enlisting and spilling his blood in the trenches of WWI France. On my wife’s side of the family, her American grandfather served in both WWI and WWII. He was a First Lieutenant in the Philippine Rangers and died while defending the American Republic. My mother-in-law and her mom spent the war as American POWs in Santo Tomas civilian internment camp in Manila. They were both lucky to survive the war after being starved and mistreated by their Japanese captors.
When it comes to Congress, I would like to quote the dying Mercutio: “A plague on both your houses.” Both the Republicans and Democrats have turned a human rights issue (my birth right as enshrined in both the US constitution and the United Nations Universal Declaration of Human Rights to which the US is a signatory) into a base political issue with both parties pandering for overseas votes.
@Petros expressed my sentiments exactly above when he said: “@James Jatras, Good comment. Ask not what Trump can do for you! Ask what you can do for Trump.”
@Patricia Moon. Thank you for all you do here at IB. I for one was not offended by the Trump satire that was posted to Brock a few days ago. Nor would I be offended if a piece criticizing or satirizing Hillary were posted here. Neither candidate is fit for the office of the presidency in my opininion. I think both candidates, and their respective parties, deserve to be pilloried.
Hillary, pillory, pox…on America.
I don’t detect a link for this excellent piece Jim has written. Has it been published somewhere, other than here? If not, it needs to be. When the USA declared sanctions on Iran, Ron Paul said that this was essentially an act of war. FATCA is a form of sanction against all countries outside of the USA. It’s a do it or we’ll “blockade” your financial institutions threat. I can see this as being an act of war, even if our PM can’t. Therefore I think Canada should close its air space to all enemy fly-overs, including US passenger jets, unless each flight is fully vetted by a form at least as long and intricate as a 3520.
@Jim
I don’t know much about lobbying. How is it different from what say American Citizens Abroad, AARO and all the other expat groups are doing in Washington?
Maybe a big public protest on parliament hill in Ottawa with lots of media attention would get the Canadian government out of hiding behind their lawyers and into taking on the US with CATCA! Yeah, in our dreams. Even though there are one million of us, we barely got a dozen when we tried it the last time. So frustrating, watching the months and years tick by….
@EmBee sorry, I was so busy putting in all the other links I forgot that one. (!) I cannot manage that on my phone. Having some balcony time. Will add when I go in.
@BC Doc
Thank you. I appreciate that a great deal.
@Jim Jatras Before something like CATCA, one might imagine the Canadian Government publicly calling out the US Government financially bullying (FATCA, CBT FBAR etc). One art of diplomacy is maneuver without having to pull such levers.
Also, as per the IGA, it appears that there is room to renegotiate by the end of the year in regards to lack of reciprocity. Is this a deadline? Meaning that if we get into 2017 and there has been no request to renegotiate, then does this diminish obligation to oblige a later request to do so?
It seems that the Singaporean Prime Minister has just “wised up” to the need to let the big fat bully ravage him up the rear end:
“The two leaders affirmed efforts to support expanding economic ties through closer cooperation on bilateral tax issues, and noted ongoing discussions between the two sides on a tax information exchange agreement (TIEA), which will permit our two countries to exchange relevant tax information to enforce our respective tax laws, and an intergovernmental agreement (IGA) that provides for reciprocal automatic exchange of information with respect to certain financial accounts under the Foreign Account Tax Compliance Act (FATCA). Both sides are committed to complete negotiations and sign the TIEA and the reciprocal FATCA IGA as soon as possible with the aim of doing so by the end of 2017. The leaders noted the two countries would maintain discussions on whether to negotiate an Avoidance of Double Taxation Agreement in the future, taking into account double taxation with respect to both U.S. investments in Singapore and Singaporean investments in the United States and our mutual interest in avoiding base erosion and profit shifting by multinationals.”
https://www.whitehouse.gov/the-press-office/2016/08/02/joint-statement-united-states-america-and-republic-singapore
@EmBee
See above or here:
reposted in its entirety with permission of the author
Thanks Tricia. You have a very clever phone. Our phone is pretty stupid. It’s achored to the wall by a cord and you can only type numbers on it. 😉
@ Patricia Moon
Oops. Your link goes to the National Interest article titled “GOP Woos Americans Abroad, Democrats Tell Them to Get Lost” which is not about reciprocity.
My question to the ooh-rah, semper fi, “Do or Die…” Jarhead who has the last post
“Perhaps, as a shocking change of course, the Republicans can try embracing smaller government, less spending, less taxation, and less regulation for all citizens. Maybe some actual movement toward these things, instead of lip service, while continuing to help the Democrats build the warfare and welfare state? Oh, silly me, it’ll never happen. Where is the vote buying and power grabbing in that proposition?”
Oh…so I presume that he’s going to vote Independent or shall we say Third Party – Libertarian? If not, then he’s part of the problem.
@EmBee
Thanks. Fixed now.
Up till now- countries are sending information over for free. How about if the banks etc who are sending over information were asking for money for it? Like LOTS of money for the information to be sent so that it wouldnt be lucrative for America anymore? WHY are countries NOT asking for money to comply with american laws? Every piece of information should have a price tag on it. To the point that America relents.