From Sept 13 Reuters article:
In February, in the face of industry complaints, the U.S. Treasury Department said some countries could comply by collecting required financial data from their home-country institutions and forwarding it to the United States.
Initially, Treasury said that France, Germany, Italy, Spain and the United Kingdom would be allowed to take this “intergovernmental approach.” Japan and Switzerland were later added to that list under a different model.
The UK on Friday became the first country to finalize a tax information-sharing pact with the United States under FATCA.
The U.S.-UK agreement, pending approval by Parliament, spares UK banks, funds and other financial companies from reporting client information directly to the United States.
Treasury is now negotiating with at least 40 countries for FATCA tax information-sharing pacts, tax lawyers said.
A Treasury FATCA negotiating team is scheduled to meet with foreign financial businesses on Thursday in Paris and on September 26 in Singapore on tax information exchanges.
Bilateral agreements to implement FATCA are “a workaround,” said Mark Matthews, a lawyer at Caplin & Drysdale and former head of the criminal investigation division at the Internal Revenue Service.
Source:
http://www.reuters.com/article/2012/09/18/us-usa-tax-facta-idUSBRE88H15X20120918
Note: Caplin & Drysdale, mentioned above, is home to Scott D. Michel and H. David Rosenbloom, who have written important articles on FATCA. Michel has also testified before the Canadian House of Commons Finance Committee on tax related issues.
*I wonder if Egypt is among these 40 countries, given the fact that three of the newly-elected Egyptian president’s children were born in the US and, unliess they have renounced their US citizenship are subject to US taxation on their Egyp-tian income as well asbeing subject to FBAR and FATCA reporting by banks, etc.
In letter to me sent to me on June 26,
http://isaacbrocksociety.ca/2012/06/26/a-response-from-john-weston-mp-on-fatca/
my MP John Weston told me that he and other caucus members had met with Mark Matthews in May. Mr Matthews also provides close consultation with some in the cross-border legal community in Canada. As he is quoted as saying an intergovernmental approach “… is clearly less airtight and bulletproof. But the (FATCA) statute as written was wholly unachievable,” and is recommending it as a “workaround”, could Canada be next?
I did a little research into Scott D Michel’s testimony before the Canadian government’s Standing Committee on Finance back in February, 2011, in its study of tax evasion and offshore bank accounts:
http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=4937782&Language=E&Mode=1#Int-3723162
It appears he was instrumental in the creation of the 2009 OVD program:
‘For decades the Internal Revenue Service has had on its books a voluntary disclosure policy aimed at giving non-compliant taxpayers a way to come back into the system and avoid criminal prosecution. The policy did not cover civil money penalties—financial penalties that might be imposed on such a taxpayer—but under American law, these penalties theoretically were so high that American taxpayers were discouraged from coming forward.
So a small group of practitioners—I was part of this group—approached the IRS in 2008 and urged them to adopt a settlement initiative that would provide Americans with a clear path to come back into the system and give them a reasonable degree of certainty over what financial consequences they would face for doing so. The program was announced in March 2009, it was updated with procedural and other guidance, and at its conclusion in October 2009, some 15,000 Americans had come forward to acknowledge their previously undeclared foreign accounts.’
but now sees ‘problems’ with that path to compliance and describes what an effective voluntary disclosure would be. Of his five suggestions, two were:
‘the policy should provide a clear path without any degree of trickery or risk for somebody to come back into the system and be reasonably assured that they will not be prosecuted for criminal tax violations. If the program does not provide for this type of risk-free approach, it will fail.’
‘there is also, at least in the United States, a class of taxpayers who live outside the country. For these people, tax compliance has not been very high. They’re not criminals; they generally don’t owe tax, because of applicable foreign tax credits. But in my judgment, a policy ought to take into account that there are “foot faults” in compliance that should not be penalized in the same way as real tax cheating.’
The Canadian government has known about USP’s in Canada tax compliance issues, and perhaps how the US should deal with it for some time now, months before most of us knew there was a problem.
Anyone have a list of the 40 countries?
FATCA TAX TOUR TAKES OFF!
http://www.iexpats.com/2012/09/fatca-tax-tour-takes-off/
No mention of Canada on their world tour, where they are certain to pick up at least a few groupies we know of.
*At least 27 of the 40 are EU27. Given thanks to Mr. Barraso and Mr. Von Rompuy.
Who is Von Rompuy
*@Bubblebustin
Interesting what you found on Michel. He has more recently been quite critical, as noted below:
1. Michel and Rosenbloom, “FATCA & Foreign Bank Accounts: Has the U.S. Overreacted?” May 31, 2011. http://www.capdale.com/fatca-foreign-bank-accounts-has-the-us-overreacted
“We believe it is time to seriously consider whether the disclosure and withholding regime imposed by FATCA should remain the law. Let us be clear — we do not condone tax evasion, and we believe that the United States has taken important, if not remarkable, steps toward reducing the number of Americans who hide money abroad…But FATCA strikes us as going after a bee hive with a tactical nuclear weapon. We cannot imagine that this statute was the product of careful cost-benefit analysis…
“In any event, it is becoming increasingly apparent that the backlash from FATCA, the burden on IRS regulation writers, and the enormous cost of compliance are not worth the tax revenue that FATCA is likely to produce or to justify the other benefits of enhanced compliance. We urge Congress, working with Treasury and the IRS, to consider the repeal of FATCA’s core provisions and the consideration of alternative approaches aimed at solving a perennial tax enforcement problem without engendering a profound anti-American reaction overseas”
2. Michel, “OVDI Is Over — What’s Next for Voluntary Disclosures?” October 17, 2011. http://www.capdale.com/ovdi-is-over-whats-next-for-voluntary-disclosures
“Starting mostly with OVDI #2, another group of taxpayers began streaming in. They had lived abroad for many years. Some had been born to foreign parents and left this country as infants; many were dual citizens at birth. All had routine ‘‘foreign’’ bank accounts in their country of residence and were fully compliant with the tax laws of that country. Few had grown up in countries that taxed worldwide income. Others had been assured by foreign accountants that they did not owe U.S. taxes (which was often true because of the foreign tax credits available to them). A few did not even know they were U.S. citizens. Yet, in part because of frightening publicity in their home country, for the first time, the taxpayers in that group — which comprised probably only a small percentage of noncompliant Americans living abroad — were anxious and concerned….
[One paragraph on the “5 percent solution” for the above, which has not been very successful.]
“This phenomenon is being experienced most dramatically in Canada, with its hundreds of thousands of U.S. citizens. Those individuals, many of whom left the United States during childhood before they had entered any tax system, were stunned and angered by recent publicity regarding OVDI #2 in Canada. Despite the recently added 5 percent safe harbor for some members of that group, they cannot comprehend why the IRS is clinging to a penalty structure that could take a portion of their net assets when most of them owed no or de minimis U.S. taxes. Several highly critical articles and editorials have been published in Canada, and criticism of the United States is gaining political traction north of the border. The increasingly negative attitudes toward the United States, and especiallythe IRS, hurt cooperation in a critical relationship.”
Note: I certainly disagree with the claim that the innocent persons at risk “comprised probably only a small percentage of noncompliant Americans living abroad.”
*Video of Scott Michel here:
Wow, really? Every single EU country has sold out? That’s rather sad if not unexpected…
Now I don’t really like Barosso much since he is not directly elected and seemed a bit too smug to me when I heard him speak a few times, but appointing a Belgian politician like Van Rompuy to that position was probably the worst choice the EU could have made. He is tailor-designed though for someone wanting a total figurehead with no authority or personal presence, which is what I imagine that the backdoor meeting of EU heads of government had in mind when they chose him.
I have seen Nigel Farage give a talk once and he is the exact opposite of the two above – A very good speaker and has very clear positions. Besides calling Belgium a “non-country” (which I obviously didn’t really like hearing…) I do find him much more amiable than the current crop of leaders we have nowadays. At least he was elected!
*I suspect Obama has told Barraso that if the EU plays ball on FATCA the US will bail Greece out after the election. Canada sure isn’t going to bail Greece out and other “PIGS” countries.
MEP Sophie in’t Veld is still fighting this and might be someone you want to get in touch with. However, she is getting completely stonewalled by the EU Commission and Barroso claiming all of the EU internal documents on FATCA are “classified.” At the end of the day the EU goes a long because the want the US military to stand between them and Vlad the Impaler’s Russian Bear. Now have all EU27 countries truely given up on FATCA. That is hard to say. I have heard the Danish EU Presidency earlier in the year tried to block the UK, France, Germany, Italy, and Spain from cutting a deal without the involvement of the other member states but were overruled by Barroso.
http://www.expressen.se/noje/pomperipossa-i-monismanien/
http://everestlancaster.wordpress.com/2009/06/02/pomperipossa-in-monismania/
Pomperipossa in Monismania.
In the form of a fairy tale, the famous Swedish children’s book author Astrid Lindgren described how she, as Sole Proprietor was forced to pay a tax of 102% of her income.
What follows is a free translation of the famous publication, which was published in the Swedish evening tabloid Expressen on March 3, 1976. (For the purpose of comparison, one 1976 krona is roughly equivalent to one 2009 U.S. Dollar)
I am going to tell you a fairy tale. It is of a woman; let us call her Pomperipossa, which is a good name to call someone in fairy tales. She lived in a land that we call Monismania, for we have to name it something.
Pomperipossa loved her county, its forests, mountains, lakes, and green groves, and not only that, she also loved the people living there. And even the wise men that ruled the country, oh, she thought they were so wise, and because of that she voted faithfully for them every time there was an election to decide who should rule Monismania. Those that had decided everything for more than 40 years had made such a good community, she thought. No one in the land needed to be poor, everyone got a piece of the welfare cake, and Pomperipossa was full of joy that she had been able to contribute a good portion of the cake as they baked it and spread the wealth around. Oh the sweet aroma from a well baked cake!………..
Time to take out my savings and invest in a mattress company. Demand is expected to skyrocket.
Win win.
Hopefully then I get mine at cost.
It’s now only a matter of which currency would be good enough to stuff in it.
@Northern Shrike (I like the more dove v hawk perception of your ‘handle’ :-))
It was you who tipped me off in your post where to look for more info on Michel. I am naturally curious about Caplin & Drysdale because my lawyer consults with Mark Matthews on a regular basis.
So what we have is a very prominent law firm that manages to convince the IRS to revise their voluntary disclosure in 2009 to create the OVDP, which this firm now admits was inadequate in addressing the needs of USP’s abroad. This same firm appears to be strongly anti-FATCA but at the same time is promoting intergovernmental agreements as the best way for FFI’s to comply with FATCA. This firm has been also working closely with the Canadian government which by all appearances is reticent enter into an IGA. Am I missing something?
*I would say Caplin & Drysdale is probably more open minded on this issue than other US law firms. I don’t see them behind the scenes engaged in some type of massive plot to benefit themselves somehow. The other member of the Caplin triumvirate is David Rosenbloom(also a law professor at NYU) who has published some interesting stuff here.
http://www.law.nyu.edu/news/ROSENBLOOM_DAVID_FATCA_PODCAST
He has also written the following
http://www.capdale.com/article-from-tax-analysts-switzerland-and-the-us-what-we-have-here
I have considered trying to reach out to him and see if he would write something perhaps as a rebuttal to Don Whiteley’s piece in the Vancouver Sun.
*In case you were curious looking at Geithner publically released schedule he has talked to Flaherty on a one on one basis for exactly 15 minutes since January 1st(all over the phone).
@Tim
I didn’t mean to imply that Caplin & Drysdale are in any kind self serving plot. From the links you provided I gain that they understand what’s at stake here as well or better than any other entity that exists, and for this reason the Canadian government was smart in talking to them. They clearly don’t support FATCA in its current form for many good reasons, but they do seem to support IGA’s, not perhaps because they like that either, but maybe as a safe harbour for countries and that’s why we’re seeing so many clamour onboard right now. Steven Mopsick is right that countries can’t wait to enter into IGA’s, but only as much as a kidnap victim agrees to get into a vehicle with a gun to their head. Canada has so far held out, but do we have another choice, and if we do, what is it?
*I personally think we are into unchartered territory vis a vis our international relations. Clearly as to my last comment regarding the amount of time Flaherty talks to Geithner the people in charge in DC don’t really take us seriously as a country. Clearly they considered the Western European countries such as France, Germany, and Britain to be far more important. The question is if we raise our voice and start yelling and screaming will it make anyone in DC takes us more seriously. My sense is no but perhaps we should do it anyways. Its hard to get Obama flustered Canada could let the People Liberation Navy(China) open a base on Lake Erie and I think Obama would basically ignore it(Others wouldn’t). I guess the question is what other countries are going to be “recalcitrant” and what type of alliance can we form with them. I can’t see everyone signing up but no one knows who might be the other recalcitrants.
*There are “retaliatory actions” that can be taken under NAFTA for example. I guess the question is what would be the US reaction to them. I don’t think anyone in the US really cares about NAFTA anymore for one thing.
I know many here are already familiar with the activities of Caplin & Drysdale, but if others are interested in what the law firm that has the ears of both the US and Canadian government’s is doing and saying, you may want to look here:
Concerning FATCA:
http://www.capdale.com/search.aspx?q=FATCA
…and OVDI:
http://www.capdale.com/search.aspx?q=OVDI
For all non-compliant USP’s considering becoming compliant this is a must-read, “OVDI is over, what’s next for voluntary disclosures”. (A nod to Just me for link to this in an earlier thread)
http://www.capdale.com/files/5997_OVDI%20Is%20Over%20What's%20Next%20For%20Voluntary%20Disclosure.pdf