TodundSteuer made the following comment which is worthy of our notice:
FATCA is a large, clumsy, crude and unilateral attempt by the United States to cudgel, bluster and otherwise persuade the world to subscribe to the US American totalitarian assumption that the financial affairs of every denizen of the planet should be an open book to whatever sovereign entity claims the right to tax that person.
Over the years since the Civil War the citizens of the United States, with no historical experience – yet – of a totalitarian regime have been steadily surrendering power at every level: individual, familial, community and state to a centralized, Federal government.
The citizens of the US have been especially careless of their rights to privacy in the realm of financial and economic affairs. It began with the gradual introduction and imposition of electronic tax withholding and reporting on investment income in the early 60′s and then took a giant leap forward in 1970 with the massive wholesale surrender of financial privacy to the Federal government through passage of the “Bank Secrecy Act”.
The co-option of US financial institutions as the long arm of the IRS was part and parcel of that development.
The early 21st century has witnessed efforts – some more successful than others – by the democratically elected representatives of the US to expand the intrusion of the federal government into nearly every nook and cranny of economic intercourse; chiefly, by imposing reporting requirements on just about any individual or business that makes a commercial purchase of goods or services. Partly out of economic necessity the IRS has recently begun the process of co-opting the entire tax return preparation “industry” in the US and bending them to its will as the unpaid “deputies” of the tax collector.
It is perfectly natural that governments aspire to ominiscience and that is why citizens must always be on their guard and be prepared to challenge. But technological developments have abetted this megalomaniacal urge on the part of the US government to attain financial omniscience. There is serious doubt about the future of cash and the barter-based – and private – economy that cash enables.
Against this backdrop FATCA should be viewed not as an end in itself but rather a very large step in the direction of spreading the notion of the omniscient state throughout the world.
In the big picture, the US insistance on citizenship based taxation is simply a curiosity – but a potentially important one. If the US did not engage in the pointless stupidity of citizenship based taxation FATCA would have remained entirely invisible within the US and the political opposition to FATCA in and out of the US – weak as it is – would likely not have existed at all.
For those of you who are understandably focussed on the collateral damage inflicted by citizenship based taxation on US persons residing outside the US, I suggest that you consider looking for allies in the battle against US citizenship based taxation in a very unlikely place:
FATCA PROponents.
For those of you with the interest and patience to contemplate that possibility and who would like a clearer picture of the truly huge stakes for individual liberty and privacy that FATCA has put into play, I commend to your attention the recently published article by Itai Grinberg in the UCLA Law Review, The Battle Over Taxing Offshore Accounts:
Itai is a very intelligent scholar who has only recently left the US Treasury Department to return to academia. He is young and idealistic and he is deeply – and primarily – concerned about the ability of the nation state to force the winners of a globalized economy to contribute to the commonwealth of whatever nation in which they reside.
The question in my mind that I cannot yet answer is: assuming that the goal Mr. Grinberg espouses is good, is it worth the price in the loss of individual liberty and privacy?
When reading his article, ask yourself: would Mr. Grinberg be amenable to backing an end to the tomfoolery of citizenship-based taxation if in so doing it enhanced the possibility that FATCA or something like it became a universal model for world tax administration?
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*I have not talked to Grinberg myself but if you look closely through the footnotes of his paper you will notice that he does not believe FATCA should apply to non resident citizens. He also believes in a significantly more multilateral solution that what is currently contemplated.
Now did Grinberg work for the US Government at one time in the early days of FATCA. Yes. Does he work there today No. Does the current administration support his views No. Was he in fact fired from the Treasury Department that is unknown but if watch the video of his appearance at NYU there was a lot of disagreement between Grinberg and Jesse Eggert. Grinberg essentially wanted to stop FATCA right now in it tracks and switch to a multilateral solution.
The crux is whether the United States Government and other countries are willing to throw its own citizens under the bus in order to implement FATCA. I too have often asked how the US can have FATCA and extraterritorial taxation of its citizens, but I also know that liberty all too often comes second to avarice.
@Petros…
thanks for pulling that comment out and headlining it!
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@Tim
I agree that Itai’s paper does offer indications that he thinks citizenship based taxation is poor tax policy. Hence my suggestion that he might be an ally on that issue.
But, assuming he does believe it to be a mistake, the reason could be for the simple political/tactical reason that it makes successful implementation of FATCA that much more difficult. US citizens overseas are usually easy to ignore by both the US and their host governments. But, as the example of Canada has shown, there are some countries in which they have a sufficiently large presence to make themselves heard.
Although the politics of implementing FATCA are not the direct subject of his paper, the subtext is clearly there. He repeatedly refers to the “coercive” nature of FATCA and, although there is no explicit mention of it, the complete failure to coordinate FATCA with America’s (former?) ALLIES in the battle against cross-border evasion before it was passed.
On top of all that there is the grotesque asymmetry of cost/benefits embodied by FATCA that the so-called “reciprocal model” of the IGA only serves to highlight. The US demands that the world pay 100% of the monetary, political and cultural cost of reordering its laws, tax and IT systems for the sole purpose of assisting US tax collection. In return it promises those countries that if and when some future Congress says its OK, it might provide them with some of the same information. Maybe. Some day. If it doesn’t cost the US anything.
FATCA embodies an information exchange system of international tax enforcement that Itai would very much like to see become the world’s standard approach some day. But he knows that because no one did any of the foundational work within the US and abroad needed to secure its acceptance by the world’s tax authorities, it and the approach to cross-border tax enforcement that he endorses are in grave danger of being rejected.
The IRS and Treasury are in the terrible position of trying to persuade the world’s governments to grin and bear it while the US attempts to shove a rough and unlubricated FATCAT up their collective poop chute.
And without even taking them out to dinner and a movie first.
@Todundsteuer
Instead, the IRS is depending on their co-enablers to market and sell this lubricated FATCAT, as you say, and they are doing it very well. It is the new year, and time for the FATCA Compliance Complex to roll out their newest shiny FATCA product…
These guys would sell the rope to hang themselves, as they say.
January 07, 2013 04:00 ET
Thomson Reuters Launches FATCA Compliance Solution
Combined Market Leading Content and Technology Reduces Regulatory Burden for Firms
LONDON–(Marketwire – Jan 7, 2013) – Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the launch of a solution to help institutions fulfil and comply with their obligations under the forthcoming US Foreign Account Tax Compliance Act (FATCA). Supported with the full power of Thomson Reuters content and solutions assets from its Governance, Risk & Compliance, and Tax & Accounting businesses Thomson Reuters for FATCA Solution, brings together market leading technology already widely used by organizations around the world to solve issues with regulatory compliance, tax documentation and tax reporting. It will enable organisations to identify, maintain and validate their customer records to assist in FATCA compliance.
It is estimated that tax avoidance by US citizens and entities using offshore bank accounts and other vehicles held at foreign financial institutions (FFIs) is costing the US government around $500 billion a year. Under FATCA rules, which become effective on 1 January 2013, all FFIs will be required to collect, manage and report all information that could reasonably point to individual’s liability for US taxation to the Internal Revenue Service (IRS) — a process estimated to cost foreign banks, with more than 25 million accounts, at least US$250 million (US$10 per account) to implement, according to the European Banking Federation and the Institute of International Bankers.
“The real costs for FATCA compliance, on an individual firm basis, will vary based on the state of the client account data in question and the technology and systems framework in place to store that data,” said Virginie O’Shea, analyst, Aite Group. “Those with a more robust legal entity or client data management framework or anti-money laundering (AML), or Know Your Customer (KYC) assessment scheme in place are likely to be better positioned to tackle the challenge.”
The impact of FATCA will be widely felt across the financial industry with banks, investment funds, insurance companies, mutual funds, broker-dealers, custodians, intermediaries, and private equity firms all having to comply. FATCA places significant reporting requirements on firms to identify US account holders. This will create significant operational and systemic pain points, particularly around on-boarding, classifying and documenting new clients, and in gathering sensitive data from a variety of structured and unstructured sources.
Thomson Reuters for FATCA Solution comprises modules for On-Boarding, featuring US indicia search; Self-Assessment, featuring W-8 and W-9 form preparation and collection; and Tax Information Reporting, featuring forms 1042, 1042S and 1099. The solution also features configurable regulatory and management reporting. It is designed to integrate easily with organisations existing processes and technology and is offered as an installed or hosted solution.
“FATCA compliance will require a multi-disciplinary approach that will touch many points across an organization,” said Laurence Kiddle, commercial director, FATCA, Thomson Reuters. “Thomson Reuters has brought together a number of leading tried and tested technologies, spanning governance, risk, compliance, tax and accounting to enable compliance with this new direction in taxation regulation. This approach makes us uniquely placed to provide a full, and modular, solution that can help institutions fulfil and comply with the obligations they are under and supports every stage of the challenges they will face as a result of FATCA.”
Thomson Reuters
Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world’s most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go to: http://thomsonreuters.com
*Todundsteuer
I’ll try to get in touch with Itai. My general experience is even people broadly in favor of FATCA whom I have been able to contact are quite eager to watch the FATCA Forum videos from last month if for anything to see “regular” people debate these issues.
I still am not sure Itai is really a person of influence on the US side in terms of FATCA. The real people of influence on the US side at least in my view tend to be older and decidedly less idealistic. They are people like Richard Harvey, Stevie Miller, Susan Morse, Mary Baker Burke, Stephen Shay, Bill Wilkins etc. These people strongly believe the US is the greatest country in the world and has the soveriegn and unilateral right to defend its tax base and screw everyone else. In my mind the above are FATCA Dead Enders that must be broken and crushed.
If you are interested Susan Morse(who seems to write about FATCA and only FATCA) and Allison Christians(the professor at the Toronto FATCA Forum) are going to be debating FATCA during a big tax law conference at Peperdine University in Malibu, CA. It might be an interesting even to see.
@Tim
Interesting! If Allison has been invited to a FATCA debate at a big US tax law conference, does that mean possibly more influential people in the US are paying attention to the effect on Americans living abroad?
It would definitely be an interesting debate to see
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