Germany will not meet its Foreign Account Tax Compliance Act (Fatca) obligations if the US reneges on an intergovernmental agreement with the country, an observer of the US legislation warns.
….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.
As well as the five intergovernmental agreements, the US has entered into so-called model II agreements with Switzerland and Japan. Nordic countries have also been pushing for reciprocity-style agreements.
Schulte warns this may have a negative impact on the reciprocity process. “Unfortunately, if other partner countries insist on reciprocity too, US banks might face even more effort and compliance costs than their foreign counterparts, since they will have to identify and report customers from not only one but from various countries. It’s hard to imagine this could really work.”
*It is interesting that the US government insists on getting stuff from others, but doesn’t seem to give them the confidence that they will receive the same in return as requested.
*I think its reasonable to expect that FATCA will fail. When more Americans realise that banking information is going to Germany and other European countries they’re not going to be happy. Second, the US will not honour any reciprocity agreements, they’re already operating in bad faith. Just look at how they’ve treated Americans abroad.
House votes to postpone IRS rule on foreign deposits in US banks
If they don’t want that, it is difficult to see how they would implement FATCA reciprocity. It seems highly similar, but instead of providing the info to the IRS, they would provide it to foreign governements.
Funny how the timing is right for FATCA, which is going to have the effect of removing capitals from foreign banks, but not for FATCA reciprocity, which is going to remove capitals from US banks.
Maybe they should wait another 5 years or so, that the recession is over to implement FATCA all together 🙂
*This news today about the U.S House of Representatives postponing the IRS rule on foreign deposits in US banks effectively means Germany will not implement FATCA because reciprocity will not be possible.
*yes but the senate must also agree. That’s the catch.
Is there a way to know when it’s up for vote in the Senate?
*no. Marco Rubio has about twenty co sponsors but all but one are Republicans.
Salon is lashing out at Rand Paul and DeMint on their opposition to FATCA
Tea Party shields tax dodgers
Rand Paul and Jim DeMint are complaining that new rules on tax dodging will make Wall Street suffer
The author Andrew Leonard (@koxinga21) concludes:
How about this quote from the author Andrew Leonard (@koxinga21) :
“How many foreign expatriates really need to have more than 50 grand in their foreign bank account?”
Wow, now, it is not only a crime to bank where you live – outside the US, but Andrew Leonard tells us exactly how much our accounts can add up to.
What hubris. So now, not only are any bank (and other) accounts held where we live outside the US automatically deemed ‘foreign’ and suspect (particularly in Switzerland according to Levin, Schumer et al.) but we’re also told exactly how much is too much for us to have earned and saved. If we live outside or are born outside the US we’ve got to justify how much is in our legal, post-tax registered accounts (including the ones held jointly with non-US citizen spouses and family), but no-one tells those inside the US what they may or may not amass.
So, if we saved a paltry 1000. per year over a few decades, or annually over an average lifetime (a very minimal sum if you’re 50 or older), or sold a very small house, or received anything at all from parents, etc. – that is too much, and has to be investigated by the US, (on top of the layers of legal oversight already governing us in the sovereign non-US nations we report to, where we are born, live, and earn). It is now apparently, officially a crime to save more than $2.74 per day or $83 per month annually if you’re US person born or living abroad.
Now, those inside the US can prescribe for us how much we’re allowed to save? No more than 50,000. per household under FATCA if we’re living in a non-US country. Or, no more than 10,000. under FBAR.
So, no banking, saving, earning, working, living, or any other normal human activity may take place outside the US if you were born there, or had a US parent.
And this is designed and enforced specifically on those living outside the US, by the self-proclaimed shining beacon of freedom for the world?
A DATCA summary page
*badger, in Switzerland, mortgage payments are generally fixed. One cannot pay more or less. Mortgages are also not necessarily paid off after a number of years. Instead, Swiss may refinance over and over and over again. Each time when refinancing, a Swiss may have a lump sum of taxed and saved cash which might be used to reduce the mortgage debt prior to locking in the new contract. It may thus be normal to have $100k in a local account that one saved up, which will be used to reduce the debt on the mortgage. FBAR and FATCA both seem to be uninterested in mortgage circumstances. A Swiss might thus have $100k in an account simply because they could not pay more on their mortgage and were waiting to reduce the debt when refinancing. Of course, with the current low mortgage interest rates of around 1.2%, the $100k saved up to reduce the debt might be invested somewhere else with a higher return since debt reduction means more taxes. Don’t expect for US politicians to know or care about things that they obviously don’t understand and have no reason to with a residency-based tax system. Yet, with the current US tax system, American politicians should actually know this stuff better than I do (which is obviously not the case)
As such, here’s my response:
*I find it surprising that the FFI have not raised the issue of Fair
Trade. If reciprocity is not forthcoming, then requiring all foreign
financial institutions to bear the extravagant costs of identifying and
reporting on US Persons would put them in an unfavorable position vis à vis US domestic institutions. I wonder how that sits with the WTO?
*I believe that FATCA can be challenged under NAFTA, chapter 14 financial services.
FATCA imposes reporting obligations on Canadian and Mexican financial obligations which places them at a competitive disadvantage in competing for and providing cross-border financing in the NAFTA area, and constitute a non-tariff barrier to trade in financial services. The lack of reciprocity for similar reporting requirements, makes the US a tax haven to Canadian and Mexican authorities.
A similar challenge should be possible at the WTO under Sector 7, finances.
The US successfully challenged the Belgian income tax practices. The information below is easily accessible from the WTO website.
2 November 1976 INCOME TAX PRACTICES MAINTAINED BY BELGIUM
8. The Belgium income tax system is based on the principle of world-wide taxation of residents and on the source principle as far as taxation of non-residents
The US argued that Belgium tax practices, placed US institutions at a competitive disadvantage
@Patricia. Thank you! that is excellent information. I wonder why we have not seen these points raised in the media?
@Just Me: That salon article deserves to be a separate thread, it is a work of liberal journalistic art at its finest.
Now that expats have been tied to the Tea Party by the left, that of course makes them racist as a group in the same way the Tea Party is. They are against high taxes, or at least tend to side with people like Paul and Demint who are anti-tax-rape and anti-FATCA. And of course as far as the left and the media are concerned, all expats are one with those ultra rich 1% tax-cheats who no longer want to send millions to the welfare state black hole.
So IBS, how does it feel to be a racist organization? You are in the eyes of the left. This is what happhens when whoever is running the government is allowed to make governance about “fairness” and “racism”, terms which they control the definition of.
Here is a relevant recent case, is this really racist?
“With so many Africans in Greece, the West Nile mosquitoes will be getting home food!!!”
She is banned from the olympics for tweeting this un-tasteful joke. Unfortunately she caved in an appologized, but she now knows what it means to become a victim of left wing tyranny.
*“How many foreign expatriates really need to have more than 50 grand in their foreign bank account?” ?????
That might seem like a huge sum to a young worker just starting out, but having more is hardly a sign of being a “big player” . Can you imagine if the IRS started treating everyone with more than $50,000 in their domestic accounts as a probable cheat? I imagine the whales wouldn’t have an account with anywhere near as little as that.
I am a self employed professional who is close to retirement. I have no pension. If I had less than $50,000 in the bank, I would be in big trouble.
I have no problem with the IRS going after the real cheats, which are the US resident tax payers who are actually “hiding” their money in foreign accounts, and not paying the taxes they are obligated to to their own country. I hate being lumped in with them. Personally, I think a lot of the “support” we get from the tea part types, is really using us. They don’t really care about expats. But it is more politically popular and will get more support to talk about us than about the whales. They are using our difficulties to try to get this whole thing repealed, but I think their real agenda is to protect the whales What really needs to happen is that it get fixed, and intelligently thought out so a to focus on the real culprits.
Actually I think we are being used by both sides. I am beginning to think the bill was badly designed on purpose. You talk about going after the cheats, so the population thinks you’re going to get the bad guys, but you use a bill that catches lots of benign low hanging fruit, and then claim to have gotten lots of results.
Maybe I am becoming paranoid…
Confederate: Haha, racist, huh? Just because we live abroad? That’s a good one. I don’t even know who the Tea Party is. That tells you how much I care about US Politics.
Re the Salon article: that author is an idiot or he has lived on some distant planet for the past 50 years. $50k defines a BIG player? You’ve got to be kidding me. If they want to catch the big whales (and probably make things a little more workable) why not set the limits to 10 million plus?
I feel like I’m on a cruise ship listening to elevator music while I wait for my new citizenship to be approved. This stuff takes patience, I guess.
Of course there is potential for someone to be hiding their profits in a faraway place, but the whole premise of tax cheats making big investment money is all quite ridiculous. The last times that somebody made serious profits on investments were the pre-bust dot.com traders, the day traders, and the first customers of Bernie Madoff. There isn’t much return on any normal investment product these days.
“I don’t even know who the Tea Party is“
The tea party is a party of racists, at least according to the following:
James Earl Jones
They also are the only ones who consistently stand for small government, low taxes and enforcing the constitution. Some of its more prominent members, who must therefore be racists, are: Ron Paul, Rand Paul, Scott Walker, Jim Demint. If a prominent IBS member like you doesn’t even know who the only hope for ending citizenship based taxation is, then the situation is indeed very bleak.
*In the early days of the modern Tea Party, they gave me the impression that they opposed Obama unconditionally no matter what he said or did. Hopefully, they have grown up since then. I didn’t vote for Obama and it looks like I won’t be voting for him in the next election, but opposing him personally won’t, cut spending, cut debt or reduce the size of the government. One must oppose the issues of such in both parties.
The libertarian, constitutionalist, small government Tea Party is our natural ally on the US side of the border. The Tea Party is not racist but have been dubbed as such by their opponents to discredit them. This is an ad hominem attack.
Whether we in the rest of the world are naturally incline to the left or right, our best allies in the United States are going to be those, like Ron Paul, who wish to shrink the size and scope of the United States federal government, abolish the IRS, abide by the strict rules and limitations on government that the US Constitution provides, which if you look at the many articles on the side bar, would normally protect us, if the folks like Obama, Geithner and Shulman ever wanted to obey its limitations in keeping with their oaths to do so.
Our only hope is that the US would shrink its federal government. As long as it continues to grow parasitically devouring all the wealth in the United States, sucking all the power and oxygen for itself, it will continue to want to grow outside its borders. It is sick joke, that expat American progressives throughout the world supported Obama, only to have him turn against them and their bank accounts: We need to understand that Obama is our enemy because he is the greatest proponent of a ENORMOUS UNITED STATES FEDERAL GOVERNMENT, which has become a giant predator seeking expat food. Mitt Romney is little better. Ron and Rand Paul and the Tea Party folks are our friends of convenience because they want to make the US federal government smaller.
Opposing Barack Obama is par for the course. He is, after all, the president who increased the deficit to 1.5 trillion in his first year in office. He is the first president, who ever said that in his famous words to Joe the Plumber, that he intended to “spread the wealth”. The Tea Party movement is vilified both by the entire democrat party and by the establishment Republicans who support candidates like John McCain and Mitt Romney.
If a prominent IBS member like you doesn’t even know who the only hope
for ending citizenship based taxation is, then the situation is indeed
Confetti: Prominent, huh? Funny.
Actually, I don’t think that the US is EVER going to change its way on citizenship-based taxation. It would be nice if they did change, BUT I think any “prominent” member of IBS stands a greater chance of getting hit by lightning before the US does actually change. The US doesn’t care about doing what is practical or makes sense. I don’t think they ever have. Anyone who lives outside of the US-propoganda-bubble for more than one day will start to notice this.
Ok, so basically a tea-partier is anyone who has different views from the people who are in control. Then they use the R-card. Not surprising…. Kind of childish isn’t it. This is why I don’t care for US politics.
Just catching up on my reading and I want to acknowledge your find about DATCA being delayed by that House vote.. In my opinion, this is a big deal, especially with such a wide margin. Sure the Senate has to vote, but if they do it on narrow 50% up and down vote, their might be a Dem vote or two that would go the right way. I am more hopeful then in a long time. Without DATCA, FATCA has a harder time flying!
Thanks, Just Me. Yes, I am anxious to see when the Senate will vote on that and what the result will be. I ran into that article by luck. I have no clue if there will be another one with the Senate decision or where to get the information.
I wonder if that would change anything for the European countries that have already signed some agreement with the US, as well as for Switzerland and Japan. Were there anything in these preliminary agreements that was mentioning reciprocity? I might be wrong, be it seems to me the main reason they signed was because of the threat of the 30% withholding which would affect them drastically, not for the hope of reciprocity. I don’t think any of these countries want to move to citizenship based taxation.
Nothing wrong with luck. I am glad you posted it, as I had not seen it, but was expecting the first place I would see it would be a Florida paper like the one that reported about the Congressional Delegation writing Obama.
Yes, the IGAs, intragovernment agreements were all about information sharing, so if the Congress prevents the IRS from imposing DATCA, and passes nothing else, then the IGAs don’t work! In my opinion.