FATCA Discussion Thread (Ask your questions) Part Two
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persons can also request to be presenters. On the European side, the presenters often get expenses paid. On the North American side, presenters are normally self/supporting because they are usually Selling something.
@to All, I took it to mean that their main targets are wealthy resident tax evaders, going on their rhetoric. Let’s hope so, anyway! On the other hand, when talking about gathering intelligence, I hope they’re not going to decide that IBS is a site catering for tax evaders.
@monalisa1776
Going miles beyond your “wealthy resident tax evaders”:
“The law will also unearth secret wealth of financial criminals that comes from money laundering, corruption and fraud.”
In reality, it won’t accomplish any of these things, but why let the truth get in the way of a good story?
@Deckard1138
RE: “The law will also unearth secret wealth of financial criminals that comes from money laundering, corruption and fraud.” In reality, it won’t accomplish any of these things, but why let the truth get in the way of a good story?
What?! You don’t believe Max Baucus who said back in 2009, that FATCA would root out tax cheats once and for all
How’s that 50 year War on Drugs doing, at ending drug trafficking and consumption once and for all?
@Just Me
Precisely. Sorry it took a few minutes to get back to you but I was in the middle of rolling-up a big fatty 😉
FATCA Focus Shifting To Asia
Scott Michel has become, the BIGGEST co-enabler and marketer for FATCA and the IRS.
There appears to be a rather large elephant in the room and its name is FATCA!
@Just Me, wasn’t it Scott Michel who appeared in front of the Canadian federal finance committee hearings into tax evasion with Thomas Mulcair et al. in attendance?
and see the comments by a Caplin and Drysdale colleague, to the same committee in another session – read the entire exchanges:
http://openparliament.ca/committees/finance/41-1/103/?page=4
“9:20 a.m.
Caplin and Drysdale, New York University, School of Law, As an Individual
H. David Rosenbloom
I’m quite familiar with TIEAs. I negotiated one on behalf of the Government of Liechtenstein with the United States. I’m a skeptic about TIEAs or exchange of information provisions having a very broad effect, because they tend to be one-off agreements. I don’t disapprove of them as such, but they’re not going to solve the problem of tax evasion. Once they’re in place, they’re implemented much less frequently than you would imagine and with much more bureaucracy in the processing of requests and the responses to requests.
The United States took a major step when it applied FATCA, which is a statute that one could debate all morning and probably, from the U.S. point of view, a terrible idea and very offensive to other countries. But nevertheless, it had the effect of getting the world’s attention.
Information exchange is all for the good, but again, I actually think that’s a separate subject from tax evasion. I think you need to address tax evasion and you have to ask yourself one more thing: whose tax are you trying to stop the evasion of? Are we talking about evading Canada’s tax, or are we talking about evading Zambia’s tax? Those are very different questions….”
“………………
9:30 a.m.
Caplin and Drysdale, New York University, School of Law, As an Individual
H. David Rosenbloom
I applaud the involvement of political leaders in the whole tax area. I think tax is critical. You can’t have a democracy without a functioning tax system, so I’m all for the G-8 and the G-20 being involved.
However, at the current stage, we’re in a very highly technical area here. If I had one thing to recommend to this committee in the area under the heading of tax evasion and tax havens, I would say to be very careful about precisely what it is you’re talking about. Even in the few minutes we’ve been talking here, we’ve talked about multiple subjects. I think developed countries could strengthen their rules in regard to tax havens and protect their own tax bases. That’s where my statement was going.
I don’t really know Canada’s laws, but I know that in the United States there are some very simple things we could do, which we have resisted doing—presumably for political reasons—that would protect the U.S. tax base against tax havens. That’s a very different question—I want to be clear, a very different question—from what we can do to protect the tax base of Tanzania or Zambia. That’s an entirely different story, and both of them are probably different stories from exchange of tax information.
All of them are important, but putting them all together in one pot doesn’t help to solve any one of them, in my opinion.
…………..”
….”9:35 a.m.
NDP
Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC
“Separate studies between, say, evasion and tax havens, and then corruption, and then international shelters, and then eventually maybe aggressive tax planning—those are all separate issues.”
9:35 a.m.
Caplin and Drysdale, New York University, School of Law, As an Individual
H. David Rosenbloom
“They’re very related—no doubt they’re related—but if you put them all together and try to resolve them all with any one group or single approach, you’re not going to end up solving any of them.
It seems to me that a committee of the Parliament in Canada is going to be most able to do something about the Canadian tax system and perhaps operate in an international forum, but those are two different approaches. It does seem to me appropriate to think separately about each of them.”
9:35 a.m.
NDP
Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC
Separate studies between, say, evasion and tax havens, and then corruption, and then international shelters, and then eventually maybe aggressive tax planning—those are all separate issues.”
NDP
Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC
“I have a question for Mr. Gillespie.
You deal with a lot of these issues in your analyses, and I think the Halifax Initiative did a study in 2010 that states the following. The text is in English:
The biggest problem with the OECD approach, however, is that it applies to individuals, not to multinational corporations which are responsible for the majority of tax losses in Northern and Southern countries alike.
In the last meeting, we heard from officials from the Department of Revenue…”
……………………………..”
10:05 a.m.
Conservative
Mark Adler York Centre, ON
Yes. Agreed.
I’m also interested in FATCA. I know that there were a few unintended consequences of FATCA, and it is really insulting to a lot of other countries what FATCA has seemed to accomplish.
Mr. Rosenbloom, you were speaking before on FATCA. Could you comment on the negative consequences of FATCA and why it is a poor piece of public policy?
“……………..
”
10:05 a.m.
Caplin and Drysdale, New York University, School of Law, As an Individual
H. David Rosenbloom
Yes, of course.
The worst aspect of FATCA is what it did to the United States. It basically deflected large numbers of our resources into writing these incredibly detailed rules for something that’s not going to produce a lot of revenue. It never made much sense to me to take people off corporate tax audits and have them writing rules for the rest of the world.
I also have severe doubts about how FATCA is going to play out. We’re going to get tons of information from all over the world, but exactly who is going to read that information? When last I looked, they had one individual up in a warehouse in Detroit looking through our foreign bank account reports.
You know, I just doubt that we’ll go on spending all these resources indefinitely on this.
Now, I’m sure you’re not focused on that. I think most of the rest of the world is focused on the intrusion into other countries’ processes, etc. I appreciate that FATCA’s a very…. Nobody ever did a cost-benefit analysis on FATCA. There’s a huge amount of cost required of financial institutions around the world, and there’s a lot of foreign policy, foreign relations, and negative effects of FATCA, but to me it’s kind of a stupid piece of legislation just within the U.S. context.
On the other hand, I want to say—and I’m a late convert to this idea—that it has gotten the world’s attention in a way that nothing else previously did.”
I would suggest that people READ this whole exchange between the committee members. Note who was on topic,and whether their comments showed that they understood it. Some MPs showed they were interested in it and understood the distinctions between the discussion of individual vs. corporate reporting and tax issues, etc. Part of the discussion also notes that in the US, corporations are incorporated in the states (ex. tax havens like Delaware) so that lack of transparency is not addressed in the US Treasury agressive public statements because they know that the US federal government doesn’t control the corporate secrecy afforded by US states, to US corporations.
Lumping US persons ‘abroad’ in with US domestic corporations in discussing the US (or any) ‘tax gap’ is very convenient for the US, so that US officials ‘evade’ the fact that FATCA and other initiatives do not address US corporate tactics, and the US states enabling them, and will go after individuals living lawfully in other countries – and who may be duals (who have no paid lobbyists and law firms) rather than offend their funders.
Canadian officials do not understand these willfull omissions in the US rhetoric, and who do not separate the plight of Canadian citizens and resident individuals claimed by the US, from these other issues, and they will not understand what FATCA does to the ordinary person who is already completely CRA compliant, with transparent local legal post-tax Canadian accounts.
The committee does not identify or discuss or acknowledge the distortions that are inherent in any conversation about taxation that does NOT contrast US citizenship-based extraterritorial taxation from Canada (and all other countries) residence based systems.
I’ve cynically concluded that Congress frankly doesn’t give a damn about our plight. It seems the most realistic thing to do if you’re not planning to ever return to live in the States nor live a substantial inheritance to a U.S. citizen is to renounce or, ideally, relinquish if you can ASAP. I fear that the rules are going to become stricter making it either harder to actually expatriate or that there will be a lot more obstruction.
This guy let’s it all loose. David A. Stockman is a former Republican congressman from Michigan, President Ronald Reagan’s budget director from 1981 to 1985 and the author, most recently, of “The Great Deformation: The Corruption of Capitalism in America.”
“Self-titled fiscal hawks like Paul D. Ryan, the chairman of the House Budget Committee, are terrified of telling the truth: that the 10-year deficit is actually $15 trillion to $20 trillion, far larger than the Congressional Budget Office’s estimate of $7 trillion. Its latest forecast, which imagines 16.4 million new jobs in the next decade, compared with only 2.5 million in the last 10 years, is only one of the more extreme examples of Washington’s delusions. “
and the link to above
http://www.nytimes.com/2013/03/31/opinion/sunday/sundown-in-america.html?pagewanted=all&_r=1&
Freedom and Prosperity: “11 Reasons Why FATCA Must Be Repealed”
http://freedomandprosperity.org/files/fatca/11%20Reasons%20Why%20FATCA%20Must%20Be%20Repealed.pdf
1. The Height of Arrogance.
2. Blatant Violation of the Golden Rule.
3. Bullying at the Nation-State Level.
4. Disruption of International Relations.
5. Direct Conflict with Many Foreign Laws.
6. Negative Impact on the U.S. Economy.
7. Immense Burden on Foreign FIs to Comply.
8. Burden on U.S. Individuals Residing Abroad.
9. Waste of Treasury and IRS Resources.
10. Efficient and Effective Enforcement Tools Already
Exist.
11. The United States Is Not Willing to Provide
the Same Information on a Reciprocal Basis.
American Banker: “FATCA Is Far from a Done Deal”
http://www.americanbanker.com/bankthink/fatca-is-far-from-a-done-deal-1057947-1.html
From the article:
“It is either the reciprocity angle or the cascade effect of China’s reluctance that has the greatest potential to derail FATCA.”
“… the U.S. is one of the worst offenders globally when it comes to tax havens and secrecy jurisdictions…. many people, including Chinese nationals, hide money here. While Obama has asked Congress for reciprocity, he is dealing from a position of weakness. The support for FATCA is not very strong…”
“… the U.S. government will never get every nation to join FATCA and the Asia-Pacific countries are heavily influenced by Beijing… Currently, none of the Asian-Pacific countries are signed up, although Japan will probably be the first. Without Singapore, China, Hong Kong and Macau, FATCA faces real challenges.”
@Mark Twain
Speaking of David this will interest you…
On David Stockman’s Out-Rage
Doh… one less Asian tiger to fight back…
http://www.4-traders.com/news/Ministry-of-Finance-of-the-Republic-of-China-Taiw-Joint-Press-Release–16599680/
See below, very interesting short article about the conflict between a FATCA IGA and the legal systems of other countries – (in a general sense).
Similar to some of the points/questions that Prof. Christians has made, (ex. re treaty override) but also mentions additional information, using the Phillippines as an example:
………”The question, then, is whether Fatca intends to override the treaty.
Under the fundamental principle of pacta sunt servanda in international law, every treaty in force is binding upon the parties and must be performed by them in good faith. Implementing Fatca without a valid tax-treaty override will thus result in the US failing to perform a binding tax treaty and consequently breaching pacta sunt servanda.
An implied treaty override by Fatca may lie latent in the last-in-time policy of the US on conflicts between a tax treaty and an internal law. In Whitney v. Robertson, the US Supreme Court held that if a treaty is inconsistent with an act of legislation, the one last in date will control the other.
The last-in-time rule, however, may have little effect outside the US. Under international law, a state party may not invoke the provisions of its internal law as justification for its failure to perform a treaty.
Will the US nonetheless insist on applying the last-in-time rule to conflicts between Fatca and US tax treaties? Its “intergovernmental approach” to Fatca enforcement probably indicates that it is so inclined. This strategy may be animated by the idea that when national governments accede to bilateral agreements to implement Fatca, they also thereby agree to supersede existing tax treaties with the US. If this is the case, a corollary issue would then be whether a bilateral agreement not ratified by the Philippine Senate can supersede a treaty.
Moreover, if the bilateral agreement implementing Fatca does not expressly modify or validly supersede the Philippines-US Tax Treaty, then both may remain effective yet conflicting…….” from: Fatca: The end of banking secrecy? 3rd of 4 parts. ‘Fatca vs Philippines-US Tax Treaty’
Published on Wednesday, 03 April 2013 20:06
Written by Edzyl Josef G. Magante / Contributor
(Edzyl Josef G. Magante is a tax associate director at SyCip Gorres Velayo (SGV) & Co., a member-firm of Ernst & Young, and a professor of law at the Ateneo de Manila Law School.)
Bring on the lawsuits and erroneous 30% withholdings – as the US IRS and Treasury fail to provide the FFIs with any workable definition of what ‘non-compliance’ means:
http://www.complinet.com/global/news/news/article.html?ref=163106
” FATCA lacks clarity on what constitutes non-compliance, forum hears”
Mar 28 2013 Patricia Lee, Compliance Complete
“Concerns about what constitutes non-compliance under the Foreign Account Tax Compliance Act (FATCA) remain an open question, and one to which even the U.S. tax authority would probably not have answers, a forum has heard. At the Asian Financial Crime Risk Executive Forum 2013, “Risk Governance for Transaction Monitoring, Sanctions and FATCA”, hosted by The Operational Risk Practice Pte Ltd in Singapore earlier this week…………”
http://217.71.145.20/TRIPviewer/show.asp?tunniste=U+34/2012&base=erur&palvelin=www.eduskunta.fi&f=WORD&kieli=ru
This is the only meaningful thing that comes out of any google search for FATCA & Finland. It is from the Swedish language version of their parliamentary (riksdag) page
The national tax administrations have problems within their own mandates obtain information on their taxable profits of foreign custody. At the international level, it has therefore uppkokmmit different concrete projects, such as the expansion of the EU Directive on the taxation of savings income in the form of interest payments (2003/48/EC) and U.S. law FATCA (Foreign Account Tax complience Act), which aims to collect tax information from abroad. Additionally develops through international cooperation within the OECD the so-called TRACE model (Treaty Relief and Compliance Enhancement), with which the withholding tax obligation may be income taxed at the time of payment at the lower rate of tax treaties and simultaneously secured tax collection and tax administration information. With the financial crisis, interest in effective fiscal control has increased in many countries, which may contribute to consensus regarding cooperation for the improvement of tax control internationally. From the Finnish point of view, it would be important to have as part of the regulation of securities markets or at the side of it would be possible to agree on an effective communication of information relating to securities of the agencies’ needs throughout the EU. In this respect also arises a need to enhance international cooperation on tax management, which means that data collected in Finland to a greater extent be passed on to tax authorities abroad. If international cooperation on tax management is not effective, there is a risk that access to the data needed for tax deteriorate. The tax data collected could also be used for other regulatory supervision and other administrative tasks.
It implies no parliamentary interest in FATCA there. Hard to say if their administration has been subjected to the standard divide-and-conquer tactic of getting agreements from the administrations without parliamentary involvement.
“Euroclear group is the world’s largest provider of domestic and cross-border settlement and related services for bond, equity, fund and derivative transactions”
https://www.euroclear.com/site/public/EB/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3gz08BgH3MPIwMD3wAXA6MQIwNP04BgY3dzc6B8JG55J1MCusNB9uHXD5I3wAEcDfT9PPJzU_WDU_P0C3IjDLJMHBUBNM22XA!!/dl3/d3/L0lJSklKSUpKZ2tLQ2xFQSEvb013d0FBQVlRQUFFSXBBQUNFSXhoQ2NGSVV1Qy80Qm40UklBbHF3RnRla1FZaVRJaEtRQSEvNl82NVFTTDdIMjA4N1RCMEkzQk5JRDI0MktHNy83XzY1UVNMN0gyMDg3VEIwSTNCTklEMjQySzg2LzBHbTJHNDc2MTAwMDIvZGV0YWls/?mailcomponentid=86_243152&checkVisitLP=#7_65QSL7H2087TB0I3BNID242K86
Our obligations towards FATCA and towards you
We are considered as an FFI under FATCA.
And, like the Central Securities Depositaries (CSDs) of the Euroclear group, we are currently taking all necessary steps to ensure our systems and operations are ready to be fully FATCA compliant.
This should not only ensure our ability to meet our obligations under FATCA, but also mean that we can help you meet yours.
Particularly, we will provide you with:
information on the securities subject to FATCA withholding through our securities database on the web
information on the occurrence of a material change on a grandfathered security through corporate action notifications (DACE notices), provided we have received the information from the issuer or its agent
FATCA withholding services on US source payments made to those of your underlying clients that are not FATCA compliant
a FATCA penalty adjustment service in the event that you provided late or incorrect FATCA-related documentation, if and as allowed under final FATCA regulations
Have a question on FATCA?
Our dedicated FATCA team is ready to help answer your queries:
FATCA@euroclear.com
SO, EUROCLEAR IS COMMITTED TO SUCCUMB, REGARDLESS OF LOCAL LAWS
“Funny” adds start poping up for FATCA software:
Navigant Introduces FATCA FILTERSM Account Analysis Accelerator
http://www.fortmilltimes.com/2013/04/04/2598184/navigantintroduces-fatca-filtersmaccount.html
New (to me) angle on FATCA – the impact on charities; http://www.thirdsector.co.uk/news/1176970/charities-need-know-Foreign-Account-Tax-Compliance-Act/
….”the onus is on FFIs to ensure that a charity is bona fide and not a tax-avoidance vehicle; as a result, they are almost certain to require a Global Intermediary Identification Number from charities too. A GIIN is a globally recognised identification number issued by the IRS to confirm an entity’s Fatca status. Requiring an entity to have a GIIN is a simple way for an FFI to ensure it meets its obligations. “……..
Source: http://www.repealfatca.com/index.asp?idmenu=4&title=News&idsubmenu=121
ACA: “FATCA is bad law on all fronts and should be repealed.”
American Citizens Abroad Blasts FATCA in Comment to House Working Groups, Calls for Repeal as Part of Tax Reform Framework
James George Jatras for RepealFATCA.com
April 5, 2013
Washington, DC
In an April 4, 2012, submission to the leadership of the International Tax Reform Working Group and the Financial Services Tax Reform Working Group of the Committee on Ways and Means of the U.S. House of Representatives, American Citizens Abroad (ACA) – the flagship association representing the interests of some seven million Americans residing outside the United States – has again called for repeal of FATCA (“the Foreign Account Tax Compliance Act”) as part of a comprehensive overhaul of the U.S. tax system. While focusing on the particular damage FATCA does to U.S. citizens living abroad, ACA pulls no punches in spelling out the broader harm this 2010 law (now pending implementation) threatens to inflict on the American economy as a whole, while failing in its stated purpose of curbing offshore tax evasion.
Special attention should be paid to the international consequences of the U.S. Treasury Department’s attempts to implement FATCA via “intergovernmental agreements” (IGAs), which are nowhere mentioned in the law and have not been authorized by Congress. IGAs threaten to compound the harm inflicted by this misguided legislation by repatriating FATCA’s costs on U.S. domestic institutions (and American consumers) under an unwise, unworkable, and unbalanced attempt at “reciprocity” with foreign governments:
“Foreign governments worldwide are furious that the U.S. Congress has the arrogance to exercise financial imperialism, to unilaterally impose its laws on the rest of the world, to require foreign financial institutions to spend tens of billions of dollars to comply with U.S. law and to require FFIs to break privacy laws in their own country in order to comply with FATCA, exclusively for the benefit of the United States, with no reciprocity, let alone any prior negotiation. Since FATCA has proved unworkable as legislated, the Department of the Treasury has been obliged to negotiate IGAs with foreign governments to circumvent the privacy issue and to introduce a limited form of reciprocity, but resentment abroad remains great. There will be a backlash and immediate consequences. The reciprocity agreements in the IGAs create a major burden for U.S. financial institutions now required to filter out by nationality all accounts owned by foreign residents and to report on those accounts to the respective governments.”
RepealFATCA.com applauds ACA’s position and calls on other impacted interests to engage directly in achieving FATCA’s repeal before the worst aspects of this misguided law go into effect. The time to get behind the repeal push is now!
James George Jatras
http://www.RepealFATCA.com
RepealFATCA@gmail.com
@RepealFATCA
+1.202.375.1007
Visit http://www.RepealFATCA.com for more information on “the worst law most Americans have never heard of”
The full ACA text follows:
+++++
Source: http://americansabroad.org/files/1813/6500/6764/fatcasubmission.pdf
AMERICAN CITIZENS ABROAD
THE VOICE OF AMERICANS OVERSEAS
Subject: Comments – International Tax Reform Working Group and Financial Services Tax Reform
Working Group, Ways and Means Committee
Attention: Representative Devin Nunes and Representative Earl Blumenauer
Representative Adrian Smith and Representative John Larson
Concerns: Recommendation to repeal FATCA (Foreign Account Tax Compliance Act)
April 4, 2013
American Citizens Abroad (ACA) was one of the first organizations to call for the repeal of FATCA soon after passage of the law in 2010 and maintains its recommendation that Congress should repeal FATCA within the framework of tax reform seeking an efficient, fair tax system. It is evident from the perspective overseas that:
FATCA will not achieve its purpose of tracking down tax evaders;
FATCA is destroying the community of seven million Americans abroad;
FATCA creates serious damage to the United States and its economy.
FATCA will not achieve its purpose
FATCA is 1984 in the world of George Orwell. Big brother will have access to all personal information, disregarding personal privacy and risk of identity theft. But big loopholes are already apparent. FATCA will lead to a two-tier banking system worldwide – those countries which adhere to FATCA and those which refuse. Russia has already refused and rumour is that the Chinese will also either refuse outright or find an indirect path to circumvent FATCA reporting requirements. The position of other Asian countries, Middle East countries and Latin American countries is not yet known.
The costs of implementing FATCA are absolutely disproportionate to the expected additional tax revenue. The Joint Committee on Taxation estimates additional tax revenue of only about $750 million a year for ten years. Compliance, however, of foreign financial institutions (FFI) will cost tens of billions of dollars and U.S. financial institutions face similar costs due to administrative requirements on payments and the reciprocity measures introduced in the Intergovernmental Agreements (IGA). FATCA has already engendered enormous cost for the IRS and Treasury Department through the hundreds of thousands of hours spent by top tax specialists devoted to drafting regulations and negotiating with foreign governments. How many more millions will be required for the IRS to administer and analyze the mass of information flows scheduled to begin in 2014? Congress has never subjected FATCA to a cost/benefit analysis.
The IRS does not need FATCA to pursue tax evaders. Even prior to the passage of FATCA, the IRS had a whole basket of tools, including the QI program, the John Doe summons, Tax Information Exchange Agreements, Mutual Legal Assistance Treaties, the Swift Agreement and the whistleblower program. Furthermore, the IRS Overseas Voluntary Disclosure Program (OVDP) has already brought in over $5 billion in just four years. The OVDP requires participating taxpayers to provide all information on international networks facilitating tax evasion. Consequently, the IRS now has a vast data base to mine for efficient law enforcement, whereas FATCA requires the IRS to look for a needle in a haystack of a massive amount of irrelevant, disparate data, costly to administer and inappropriate for effective law enforcement.
FATCA is destroying the community of seven million Americans abroad
American citizens have become pariahs in the international financial community because of FATCA. The cost of administering FATCA and the perceived legal threats are so high that FFIs prefer not to retain or take on American clients, who represent only a tiny fraction of their total clientele. ACA has received multiple testimonies of Americans residing overseas who have had bank accounts in their country of residence closed, who have been denied entry into foreign pension plans and insurance contracts, who have had mortgages cancelled, who have been pushed off of joint-bank accounts held with foreign spouses, who have lost access to credit cards and who have been forced into a cash economy.
A few major financial institutions may still allow cash accounts, but certainly no investment accounts. PFIC reporting rules exclude investment in foreign mutual funds. Only the few wealthy with financial assets in excess of $1 million have access to SEC registered subsidiaries of foreign banks for investment purposes. In addition, U.S. financial institutions refuse to take on American clients with a foreign address because of the Patriot Act. The average American abroad is shut off from all avenues for personal investment.
In this environment, it is difficult and complicated for Americans to move overseas, establish normal banking relationships required for modern life and gain international experience.
Business opportunities for Americans overseas are blocked. Foreign partners no longer accept Americans in new ventures because FATCA requires reporting to the IRS of any U.S. person owning 10% or more of an unlisted foreign corporation or partnership. Some American-owned businesses overseas have closed down because of lack of access to banking facilities.
FATCA automatically categorizes any American abroad as suspect and ostensibly discriminates against Americans abroad. Americans overseas must report their foreign financial assets on Form 8938 with their 1040 under threat of heavy penalty for non-reporting, but in the eyes of Americans abroad, these assets are local, not foreign. Americans residing in the United States have no such comparable reporting on their U.S.-based assets.
FATCA is contrary to the Universal Declaration on Human Rights, to which the United States is a signatory, as it forces FFIs to discriminate against Americans on the basis of their citizenship.i
The rapid rise in renunciations of U.S. citizenship over the last four years is directly linked to FATCA. U.S. policy has indeed gone astray when it forces its own citizens to renounce their U.S. nationality,
particularly at a time when the U.S. needs to reinforce its competitive position in the global economy.
To eliminate FATCA’s serious collateral damage on Americans abroad, the United States must adopt residence-based taxation, which would de facto eliminate applicability of FATCA to Americans residing overseas. American Citizens Abroad has submitted to the International Tax Reform Working Group of the Ways and Means Committee a detailed proposal for transition to residence-based-taxation for individuals.
FATCA creates serious damage to the United States and its economy
Foreign governments worldwide are furious that the U.S. Congress has the arrogance to exercise financial imperialism, to unilaterally impose its laws on the rest of the world, to require foreign financial institutions to spend tens of billions of dollars to comply with U.S. law and to require FFIs to break privacy laws in their own country in order to comply with FATCA, exclusively for the benefit of the United States, with no reciprocity, let alone any prior negotiation. Since FATCA has proved unworkable as legislated, the Department of the Treasury has been obliged to negotiate IGAs with foreign governments to circumvent the privacy issue and to introduce a limited form of reciprocity, but resentment abroad remains great. There will be a backlash and immediate consequences. The reciprocity agreements in the IGAs create a major burden for U.S. financial institutions now required to filter out by nationality all accounts owned by foreign residents and to report on those accounts to the respective governments.
An immediate impact of FATCA is a serious reconsideration by foreigners of the risks and dangers of investing in the United States. Foreign insurance companies have already pulled back. Private bankers are advising their foreign clients to reduce U.S. investments, if not totally divest. Foreign investment groups that had been providing fresh capital to small and medium-sized U.S corporations have stopped this activity. Latin American money is retreating from U.S. banks. The threat of FATCA confiscatory 30% withholding tax not only on all U.S. source fixed or determinable annual or periodical gains, profits, and income (FDAP income) but also on the sale value of U.S. assets creates great uncertainty and reserve among foreign investors.
FATCA creates a new barrier to U.S. exports. The President’s Export Commission has recognized that the major export potential of the country comes from small and medium-sized U.S. companies. How will they be able to initiate export activities overseas if they cannot even open a bank account abroad?
Finally, FATCA creates systemic risks for the entire international financial community, through potential processing errors, chain effect, misinformation, etc. One measure of the law – the passthru deemed essential by Congress for an air-tight system – has been defined as unworkable by the British Bankers’ Association and even by one of the authors of FATCA legislation, J. Richard Harvey, of Villanova University.ii FATCA is bad law on all fronts and should be repealed.
Thank you for your consideration.
Sincerely yours,
Marylouise Serrato
Executive Director
American Citizens Abroad
http://www.americansabroad.org
Notes:
_ _ _ _ _
i Article 7 of the Universal Declaration of Human Rights, to which the United States is signatory, reads: “All are equal before the law and are entitled without any discrimination to equal protection of the law. All are entitled to equal protection against any discrimination in violation of this Declaration and against any incitement to such discrimination.”
Protocol No. 12 to the European Convention for the Protection of Human Rights and Fundamental Freedoms states under Article 1:
1. The enjoyment of any right set forth by law shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
2. No one shall be discriminated against by any public authority on any ground such as those mentioned in paragraph 1.
Under FATCA rules, FFIs are obliged to discriminate against U.S. citizens on the basis of their “national origin”. U.S. persons and/or those considered as having “U.S. status” are being forced by their bank—under penalty of account closure—to sign, in addition to the W-9 form, W-8BEN form or document establishing “non-U.S. status”, a separate document expressly releasing the bank from complying with the country’s banking secrecy laws and/or the legal or contractual arrangements in effect upon establishing the client’s bank account. One such document from a reputable foreign financial institution attempting to comply with FATCA guidelines, states: “By signing this declaration, the client formally agrees to the Bank’s communicating the client’s personal information to the American tax authority (IRS) as well as information on assets held at the Bank and income generated by those assets. Consequently, the client hereby explicitly frees the Bank from the obligation to maintain banking secrecy.”i
The client is put into a position of no choice. Account closure of “recalcitrant” persons with U.S. citizenship would not only mean that they would be placed in a category of “closer scrutiny” by the IRS but would, in effect, result in their not being able to live a normal life outside the territory of the United States—this in clear violation of Article 13, paragraph 2 of the Universal Declaration of Human Rights, ensuring that: “Everyone has the right to leave any country, including his own, and to return to his country.”
Peter W. Hogg, CC., W.C., Professor Emeritus and Former Dean of the Hosgoode Hall Law School and author of Canada’s only comprehensive treatise on constitutional law has warned the Canadian government about the unconstitutionality of discriminating against individuals on the basis of citizenship in his letter dated December 12, 2012 addressed to the Finance Minister Canada concerning FATCA and Canadian Charter of Rights and Freedoms. “Section 15 (1) of the Canadian Charter of Rights and Freedoms provides: ‘Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, coulour, religion, sex, age, or mental or physical disability.” Professor Hogg continues: “Note that the prohibited grounds of discrimination include ‘national or ethnic origin’, and the Supreme Court has held that citizenship is an ‘analogous ground’ also prohibited by s. 15(1).” (Andrews v. Law Society of BC (1989) 1 S.C.R. 143)… “The point of this letter is to urge the Government not to agree to an IGA which would call for foreign legislation which would offend s. 15 of the Charter.”
ii J. Richard Harvey, « Offshore Accounts : Insider’s Summary of FATCA and its Potential Future », December 1, 2011. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1969123
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Mark Twain says
April 1, 2013 at 1:04 pm
and the link to above
http://www.nytimes.com/2013/03/31/opinion/sunday/sundown-in-america.html?pagewanted=all&_r=1&
Wow, he really said what needed saying didn’t he. Unfortunately, only the complete collapse of the US is likely to cause a radical change in direction. Sad really.
UK FATCA should not result in ‘capital flight’ from the Channel Islands
My comment in moderation: But as a member of the FATCA Compliance Industrial Complex, this is EXACTLY what I would expect them to say! Their vested interest and revenue stream comes from compliance consulting. Never mind that they engaged in the very BS tax shelter practices, and just settled with the IRS, that gave rise to the FATCA fiasco in the first place. http://bit.ly/ZNRPWg
Get ready for more Chinese to give up U.S. Citizenship and Greencards. http://bit.ly/12p5cRN Taiwan, US To Negotiate FATCA Agreement