If you’re an American expat in Taiwan, or an immigrant from Taiwan living in the U.S., or even a former immigrant who went back to Taiwan after you got your green card or U.S. passport, look out: your bank in Taiwan wants to sell you and your kids down the river in order to cut their costs of complying with FATCA. Here’s two recent items of coverage from Taiwan newspapers that I’ve translated into English.
These articles demonstrate a pattern of behaviour we’re seeing in country after country: banks do not care about their customers, but only seek to reduce their costs by whatever means necessary. Since they’ve come to the conclusion that they can’t fight FATCA, they’re happy to ask governments to put national privacy laws in the shredder, as long as the banks themselves don’t have to take the blame or bear the costs.
The first article is a brief, just-the-facts-ma’am report which clearly attributes the advocacy for an inter-govermental agreement solely to the Bankers’ Association, and doesn’t try to shill for such an agreement:
24 February 2012, United Daily News reporter Chiu Chin-lan, Taipei
The Bankers Association [of the Republic of China on Taiwan] held a seminar yesterday to discuss the latest developments on the “U.S. Foreign Account Tax Compliance Act” (FATCA) which imposes tax on Americans’ overseas assets. Banks mostly hope that the government can copy the practise of the five countries in Europe, so that the problem of overseas account taxation can be resolved “government-to-government”.
FATCA will come into effect on New Year’s Day in 2013. In the future, “foreign financial institutions” as defined by the law will have to report the account information of U.S. tax residents (including U.S. citizens, U.S. green card holders, and long-term U.S. residents) to the United States’ Internal Revenue Service. If financial institutions do not obey, beginning in 2014 they will face a punitive withholding of 30% on income arising from their U.S. investments.
FATCA’s impact on financial institutions is quite large. The other day, the U.S. published a draft of the implementation regulations. Although they loosened the reporting thresholds, which should help to ease the finance industry’s burden, finance industry personnel believe that the only way to truly relieve the pressure and difficulties that financial institutions face is to adopt an intergovernmental model of cooperation like the five-country European plan.
The second article is a longer item which demonstrates an important principle of journalism: “less is more”. The article would have been much better if the journalist had included fewer details, since all of the details she gives are accompanied by shilling for the Bankers Association’s view. A couple of months ago on my personal blog I translated one other item by the same journalist. That was much more balanced than this one, so I’m surprised by this sudden drop in quality.
24 February 2012, Apple Daily reporter Liu Pei-chun, Taipei
There may be a solution to the U.S.’ giant plan to collect tax all around the world, by adopting the model of cross-border governmental cooperation, to avoid having to deal with every financial institution around the world. That is to say, if Taiwan and the U.S. sign a FATCA accord, the country’s banks will be free of taxation by the U.S., will not have to report, and will not have to close uncooperative accounts, because under an international governmental agreement, the country’s banks will not need to directly sign agreements with the U.S. side, and will not violate the Personal Information Protection Act.
Adopt cross-border governmental cooperation
Once Taiwan and the U.S. can sign a “FATCA accord”, both sides’ governments will exchange information on a reciprocal basis with the aim of attacking cross-border tax evasion. For example, the U.S. will first provide Taiwan with the names of 100 U.S. citizen customers who are evading taxes, and Taiwan will give those names to the finance industry for investigation.
That is to say, if a cross-border agreement can be reached, banks will not need to take up the burden of “identifying potential U.S. [person] accounts” and will not need to close uncooperative accounts, while U.S. citizen customers who open accounts at banks will not need to worry that information will get sent to the U.S. as long as the amount exceeds US$50,000 (roughly NT$1.5 million).
The Bankers Association’s board yesterday released its report, and will also consult with the Financial Supervisory Commission. It is understood that even if the U.S. and Taiwan do not have a [double] taxation agreement, they can still sign a cross-border FATCA accord.
I translated the phrase “只要超過5萬美元也不必擔心資料會被報送到美國去” as “will not need to worry that information will get sent to the U.S. as long as the amount exceeds US$50,000”. This makes absolutely no sense even in the original. Either the journalist is under the bizarre impression that U.S. Persons will be thrilled that the bank automatically sends their information to the IRS, or she left out a “does not” before “exceeds”. I’m guessing it’s the former, as the whole tone of the article makes it very clear she only talked to the Bankers Association, not any of the hundreds of thousands of dual citizens in Taiwan who might be affected by FATCA. Going on with the article:
Country’s banks will be free of U.S. tax
According to the Bankers Association’s report, the U.S. side has already signed up five countries (the U.K., France, Germany, Italy, and Spain) as “FATCA Partners”. Under their agreement, information will be shared and exchanged across borders at the governmental level. The financial industries of these five countries will report the information directly to their home country governments, instead of reporting it to the United States.
Under this agreement, FATCA Partner Countries consent to three feasible mechanisms. These five countries’ financial industries must gather and report to their governments all the information required for execution of tax collection. Next, the financial industries must also establish substantative review procedures to distinguish U.S. accounts. Finally, on a basis of automatic information transmission, the governments will transfer to the United States all the information reported by their financial industries.
The United States also pledged that FATCA Partner Countries’ financial industries will not need to directly sign agreements with the U.S., will not have to transmit customer information, and will not have to pay tax. Furthermore, based on the premise of reciprocity, the U.S. government will gather and send information about the accounts of U.S. citizens domiciled in the Partner Countries, which those Partner Countries will then use to investigate tax evasion.
There are a lot of dual citizens in Taiwan, spread out on both sides of the political spectrum. If you know any, or know anyone who has parents in Taiwan, tell them to write their legislators and oppose the Bankers’ Association’s plan to sell out Taiwan’s sovereignty and shred its privacy laws in order to save a few dollars.