The FATCA IGA has been released by HM Treasury this morning. A couple of comments: This type of legislation being proposed to be enacted by the UK Government in Canada would be outright Charter violation. The UK admits to the agreement not being reciprocal and in fact the information UK will be getting from the US is basically the same as Canada is already receiving. David Cameron and George Osborne are also total losers.
Here is the quote from George Osborne:
Welcoming the publication of the model, George Osborne, Chancellor of the Exchequer, said:
“We need to be as tough on tax evasion abroad as we are at home. The Model Agreement constitutes an important step in tackling international tax evasion. We have achieved substantial changes to how FATCA will be implemented that will provide significant benefits to UK financial institutions while strengthening our ability to tackle the evasion of UK tax. I look forward to the prompt conclusion of our bilateral negotiations and the signing of our agreement with the United States.”
http://www.hm-treasury.gov.uk/d/joint_intl_statement_fatca_260712.pdf
Here is Reuters reporting on it.
US Treasury gives countries new models for tax reporting rules
Traveling today, so will digest later.
The OECD welcomes the multilateral measures taken to improve discipline and transparency in international tax
But did we expect otherwise. Theirs is a GATCA goal, and FATCA is helping them get there. Well done America, advancing the world wide agenda.
English translation from google of their press release. This has been ready to go for months, I would bet.
* Thank you Tim and Just Me. Very interesting. Would you like to make any bets on the liklihood of the US Congress actually ratifying this Convention, which introduces reciprocity ?
*Very low. Additionally there is another article out there saying Germany will not be onboard until Congress passes legislation to impose recipriciocity on US financial institutions. If you are still a US citizen very good reason to vote Republican at least for the House in the fall. Very difficult to see how Republicans support any legislation that increases the burden on US domestic financial institutions.
*This has put Flaherty in a bit of a difficult position. Canada is an OECD member and has supported OECD work in the area of tax in the past however, Angel Gurria statements on FATCA don’t exactly jibe with Flaherty’s.
*Here is the article on Germany and FATCA
These agreements are crucial, says James Jatras, principal of Squire Sanders Public Advocacy, a Washington, DC-based government relations firm – to the extent that some countries may not comply with US Fatca requirements if they do not receive data in return. He points to Germany as being particularly vocal on the issue.
“The only way Berlin can see going forward with domestic enforcement of the US requests for Fatca information is to have it on a reciprocal basis,” he says. “I don’t know why that’s so important to them, but they insist it’s important. If that reciprocity collapses on the US side, I’m told the Germans will say ‘no, we can’t do this’.”
Frankfurt-based Martin Schulte, head of capital markets at the Association of Foreign Banks in Germany, agrees reciprocity is key for Germany to engage in an intergovernmental Fatca agreement. “The reciprocity is one of the key issues for the German government,” he says. “Although I don’t think the German Treasury expects there are too many German citizens hiding in non-transparent vehicles in the US, reciprocity is a matter of principle – like a balance of power and ‘we’re not just following the US wherever they go: if they want something from us, we want something back’.”
The comments come on the back of growing concerns that the agreement is not legally binding on the US side. As such, European participants fear US banks may struggle to supply relevant data to a growing number of individual countries as part of the reciprocity agreements, and may decide not to honour them.
Schulte expects the German government won’t take kindly to any kind of rescindment from the US on the intergovernmental agreement. “If it turns out the agreement wasn’t properly enforced on the US side, then I don’t think the German government would undertake substantial effort to enforce the German Fatca implementation, even though it’s going to be a national law,” he says.
http://www.risk.net/operational-risk-and-regulation/news/2194462/germany-may-ditch-fatca-if-reciprocity-agreement-not-honoured-experts-warn
https://twitter.com/FATCA_Fallout/status/228509844989169664
Getting true reciprocal reporting from banks within the US is already possibly a barrier as in the case of Germany. What about true equivalent reciprocal withholding and remittance of 30% of account assets from those deemed recalcitrant foreign nationals inside the US? What equivalent reciprocity and remittance will participating countries receive from their nationals’ accounts within the US?
oohlala
The IRS has already imposed reciprocity unilaterally by imposing FATCA lite requirements on U.S. Banks.
See http://isaacbrocksociety.ca/2012/03/17/dualing-editorials-datca-vs-fatca/
and. http://isaacbrocksociety.ca/2012/04/17/datca-is-not-dead-it-lives-on/
Congress has shown little indication that it is going to stop this, inspite of some feeble protests.
Shall we take bets on the number of MSM, or should I say, “Establishment media” that report on these developments? 🙂
*However, as I understand to impose true reciprocal reporting to the degree that Germany wants requires Congress to pass legislation. Now Congress may be very well willing to do this but remember the House is now Republican controlled whereas when FATCA actually passed it was under the control of Democrats.
@Tim: Do we actually know where Flaherty stands on this currently? For the last few months, as Tiger has said, Flaherty’s “silence has been deafening.”
The silence may mean something positive is going on behind the scenes. Or, it could mean something far more ominous.
Flaherty has totally ignored my e-mails in recent months, as has my Conservative MP (except for the MP sending me a fact sheet on my FBAR obligations).
I’m still awaiting two simple statements from Flaherty or from Canadian government: Canadian banks must adhere to Canadian laws. Canadian laws will not be changed to accommodate a foreign government
Last week, Maura Drew-Lylte of CBA either would not or could not advise what the legal authority is in Canada for banks demanding place of birth from Canadian customers. I believe that is because there is no such legal authority.
If the government does change laws to allow banks or CRA to request that information, we may have grounds for a Charter challenge against the government.
I also continue to be perplexed as to why Canada would sign a “reciprocity” agreement with US on this. We already have one where each country reports on the income of their residents to each other.
With Germany insisting reciprocity is essential and US banks and some members of Congress kicking up a fuss, I think this is still far from a done deal.
*In fact in the agreement the US Treasury indicates it will push Congress to pass full “DATCA” legislation whereas the current non resident alien reporting requirement only partially entail FATCA compliance. Again the question I have is which “tea party” caucus members are going to vote for DATCA.
*Blaze
I believe if Canada signed up to this agreement as is it would invite a Charter challenge most definately.
This is Flaherty’s last statement in June:
“These are positive developments. It is yet another accomplishment for Canadians and a testament to our strong working relationship with our American neighbours. I appreciate the cooperative approach of the American authorities. Nevertheless, we will continue to advocate on behalf of Canadians on such issues with the U.S. government, including the implementation of FATCA (Foreign Account Tax Compliance Act),” said Minister Flaherty.
@Tim: I know some think I’m cynical, but that statement from Flaherty does not exactly instill confidence in me. Why can’t he just assure Canadians that Canadian law does and will apply in Canada?
As OMG said several months ago, Flaherty should tell IRS “Canada does not negotiate with financial terrorists.” That might not be the most diplomatic thing to do, but financial terrorism is also not diplomatic.
*I was slightly encouraged to see the proposed treatment of retirement plans. Article 4 ;3
“3. Specific Treatment of Retirement Plans. The United States will treat as a deemed compliant FFI or exempt beneficial owner, as appropriate, for purposes of section 1471 of the U.S. Internal Revenue Code [FATCA Partner] retirement plans described and identified in Annex II. For this purpose, a [FATCA Partner] retirement plan includes an entity established or located in and regulated by [FATCA Partner], or a predetermined contractual or legal arrangement, operated to provide pension or retirement benefits or earn income for providing such benefits under the laws of [FATCA Partner] and regulated with respect to contributions, distributions, reporting, sponsorship, and taxation”
If Canada negotiate similar a deal, RRSPs for example should be exempt. Still extraterritorial nonsense. If reciprocity doesn’t occur, I don’t expect this deal to fly.
“Just barring US investors will not help platforms escape the Fatca burden…Hall explains even where platforms do not accept business or hold assets for US investors Fatca will require new account opening procedures and systems to flag potential US taxpayers…”
http://www.moneymarketing.co.uk/regulation/ernst-and-young-challenges-platforms-over-fatca-stance/1056907.article
@Tim Now we know who to praise for the FATCA IGAs… Send your congratulatory messages to Treasury.
Treasury’s Manal Corwin Recognized As Finalist for 2012 Tax Notes Person of the YearBy: Anthony Reyes 1/8/2013
Manal Corwin, Treasury’s Deputy Assistant Secretary for International Tax Affairs, was recognized as one of ten finalists in consideration to be named the 2012 Tax NotesPerson of the Year. She was honored for her office’s work implementing the Foreign Account Tax Compliance Act (FATCA). Corwin officially represents the Administration’s tax policy interests in international settings. She is the reporting authority for the Office of the International Tax Counsel and provides advice and counsel to Assistant Secretary for Tax Policy Mark Mazur related to international tax policy and tax treaties.
Two months ago, Treasury announced that the United States is now engaged with more than 50 countries and jurisdictions around the world to improve international tax compliance and implement the information reporting and withholding tax provisions in FATCA. The building of this broad coalition of foreign governments to efficiently and effectively implement provisions that target noncompliance by U.S. taxpayers using foreign accounts has marked an important milestone in establishing a common intergovernmental approach to combating tax evasion.
Tax Notes noted how Deputy Assistant Secretary Corwin “has surely racked up frequent flier miles,” working with her international counterparts on FATCA and its related bilateral intergovernmental agreements (IGAs). As the U.S. signatory, she has already succeededin reaching agreements with six countries and has created a framework for many more to come. Two model IGAs published by Treasury serve as a basis for concluding bilateral agreements with interested jurisdictions and enable effective work with foreign governments.
Last November, the International Tax Review also recognized Michael Plowgian, an Attorney Advisor in the Office of the International Tax Counsel, as one of the top 50 influential people and organizations in global tax for 2012 for his work on FATCA which it called “arguably the biggest story in international tax in the last 12 months.”
Treasury and the IRS will finalize the regulations implementing FATCA in the near future. Visit the Treasury FATCA website for updates and further information on the continuing progress.
Anthony Reyes is the New Media Specialist at the U.S. Deparment of the Treasury.