FATCA Hits The Buffers In Russiavon iExpats von Lisa Smith – March 14, 2013
…Now Russia has stepped up to say implementing FATCA is illegal in the country as the rules are contrary to Russian and international laws.
The Russian Foreign Ministry has also declared that the country’s financial institutions would break local laws if they enter into any agreement with the IRS.
The Bank of Russia has backed up the Foreign Ministry’s stance and said that FATCA undermines the principle of equality among sovereign states…
What a turn of events my fellow disenchanted expats. To think that Modern day Russia would now be playing the role of the USA did in the mid 80’s is just sickening. But there were some that were paying attention, and they warned us that these events now unfolding would come. Most of us just didn’t want to hear it, and now we watch in disbelief as we become strangers to the place we grew up. Those from Canada might be familiar with Yuri Bezmenov. Watch, and tell me if this doesn’t send a chill down your spine and make you feel just a little sick. I honestly can’t refute a thing he didn’t try and warn us about. I hope this link posts.
I wish the author revealed her sources. She names the Ministry of Foreign Affairs and the Bank of Russia, but no individuals. When I check the English language web pages for these institutions I find nothing to confirm her assertions. In November 2012 she wrote that Russia was “stepping up to the plate”.
What happened between then and now?
I love it when their “plan” slowly and inexorably unravels before my eyes. This, coupled with news about China and Peter Hogg’s Charter opinion, is some of the best news I’ve heard in a long time. I hope the Russian news is true, but even if it isn’t, with major trading partners like Canada and China balking at FATCA, it maybe is time for certain Democrats in the US to visit their local library, get a copy of the late Senator William J. Fulbright’s excellent book “The Arrogance of Power,” read the book and extrapolate only slightly beyond the Vietnam-specific discussions in that book. The book could have been subtitled “The Limits of Power,” something the US never seems to learn in spite of some harsh lessons they’ve been taught in the past on that subject.
@NorthernShrike: Russia’s Ministry of Foreign Affairs put up an extremely long & angry anti-FATCA statement on their website last week. Among other things they called it “a nuclear bomb”, “a serious threat to Russia”, and “an attempt by the US political ruling circles to put the financial organisations of the entire world under their control”.
A country not pussy-footing. Here’s a link to the Google translation.
Hmm, after reading on, it appears to be a newspaper editorial by an economics professor rather than a direct statement by the MFA. Still, the fact that they chose to feature it on their website is \encouraging.
Great. So now the governments of the three largest developing economies (China, Brazil and Russia) have declared their opposition to FATCA.
I’d like to highlight the comment I just made on another thread: The Ways and Means Committee is now accepting comments on tax reform from the public and posting them on its website. I think this is a great opportunity to make Congress aware of the problems of citizenship-based taxation, FATCA, FBAR, etc.
This is the first great victory for Russia in the 21 century–repelling the American Imperialist Invasion of the World Banking System. Right up there with repelling the Germans and annexing Berlin. Russian exceptionalism at its finest.
Carl Levin will go down in history as the brilliant architect of a self-imposed trade barrier against American capital markets in the form of a 30% tariff.
The BRIC countries will probably give Levin a medal because America’s losses in foreign capital investment will be the BRICS’ gain.
Nice job Carl.
And @ShadowRaider, have you seen this other IBS thread?
“Compliance with U.S. tax law may violate Charter of Rights;
Opinion: Creating tax misery for nearly seven million U.S. expatriates”
By Don Whiteley, Special to The Vancouver Sun March 12, 2013
Read more: http://www.vancouversun.com/news/Compliance+with+violate+Charter+Rights/8086718/story.html#ixzz2NY9zu4Ca
Its not done yet, but Canada is NOT in the IGA bag yet.
Yesterday, I went to a Banco do Brasil to set up a savings account. Here, you just need proof of address, ID, and tax ID to open an account. When the account manager asked for a document that showed my place of birth, I almost had a heart attack. I said “Everywhere else just requires the documents that I brought.” I ended up writing down the city of birth (in English, but I shoulda translated it to Portuguese so it would look ridiculous). Anyways, even though I was scared for a minute, I didn’t hear anything about the FATCA, nor did I say anything. So I guess we’re safe here, for now. Banco do Brasil is also a semi-governmental bank so that may have something to do with it.
Just found this website along with this article. I hope this holds up. So happens I just moved my family to from the US to Russia. My wife and kids speak Russian as well as English so it isn’t quite as crazy as it sounds. In any case Russia seems good to me so far if you can deal with everything not being so manicured as it is in a US suburb.
Living in Russia doesn’t sound crazy to me. I’ve heard many good things about Russia and have even considered learning Russian myself (if only I had more time).
I can imagine that living in Russia will be a challenge but hope that it will also present some opportunities for you and your family. I wish you good luck with your move and new life there.
I understand that the US Embassy in Moscow has advertised in the English-language “Moscow Times” to encourage US citizens to register with the US State Department’s “STEP” program (Smart Traveler Enrollment Program), which lets the US Embassy know of/ track Americans’ whereabouts. The US government has caused significant problems for its citizens in the country where I live to the extent that many US expats here see the local US Embassy as an oppressor. How is the US Embassy seen by Americans in Russia? Would the STEP program be used by Americans living in Russia or do they also make a wide circle around US Embassy personnel?
I haven’t really been here that long and I don’t live in Moscow or anywhere near a US consulate. I can’t really speak for other expats in my area. Most of them that I’ve met are either focused on teaching English or missionaries of some sort. In any case it hasn’t been so challenging so far. It’s nice here in southern Russia. It’s snowed a couple times but it only stays on the ground for a day. On the other hand we had a day in February that hit 80 and today it’s in the 70s.
We were considering Cyprus for a while but opted against it since our legal status there wouldn’t have been as good. We might be nearly broke right now if we had moved.
I’m actually surprised that it’s hard for Americans to just up and move (legally) to a lot of different countries without already having a job offer or having some other special circumstances. The reason we ended up in Russia is that it made sense to begin with since my wife was originally Russian and also it’s possible to move to Russia with relatively little hassle. You have to jump though a few hoops and all but at least the hoops are there for you to jump though.
Is Russia giving in to FATCA? New article titled ‘Russia to Join FATCA Tax Watchdog’ here: http://en.ria.ru/world/20130517/181204662/Russia-to-Join-FATCA-Tax-Watchdog.html
Thanks for the post.
1) RIA Novosti is a Russian state-owned news agency. It appears that this announcement is from the Russian Finance Ministry and probably should be taken as factual and likely official.
2) The articles states: “When Russia joins FATCA, Russian financial institutions will be obliged to identify US RESIDENTS among their clients and report on them and their transactions to US tax agencies.”
Comments: I would be curious whether the term “US RESIDENTS” is intended or whether this is an inaccurate description or translation of US PERSONS/ US CITIZENS. It is also possible that Russia has negotiated a FATCA/ IGA variation whereby only the accounts of US Residents, and not US Persons, are to be reported to the IRS.
Russia is a nationalistic country and, although it may no longer be the second superpower in the world, it is again trying to control its destiny, after the turbulent 1990s.
A further note: Several months ago, Russia unilaterally let lapse a police inter-governmental agreement it had with the US, signed around 2000. The IGA allowed the US to provide police assistance and possibly funds to Russia. This is an example of Russia ensuring that it controls its own affairs.
The BBC has an article today on Russia’s plans to sign a FATCA IGA. It includes some quotes, etc., in addition to the RIA Novosti article above but does not go much beyond it. Here is the article in Russian:
“Russia has agreed to exchange tax data with the United States under U.S. law FATCA, which had previously raised a few objections from Russian officials.
Moscow will pass the U.S. tax authorities information about the accounts of Americans in Russian financial institutions, otherwise the banks would be subject to sanctions.
In the near future experts of both countries will meet to determine the parameters of the agreement, said the Russian Finance Minister Anton Siluanov on Friday.
“We will offer it for consideration and approval,” – he said, speaking at a forum of the Organization for Economic Cooperation and Development on Tax Administration, which took place in Moscow.
The adoption by the U.S. Congress in 2010, the Law on the Control of Foreign Accounts (Foreign Account Tax Compliance Act) in the Russian government initially reviewed critically.
The provisions of FATCA will lead to the disclosure of bank secrets maintained in the Finance Ministry, stressing that “the Russian legislation does not provide for the enforcement of the requirements of the U.S. tax authorities.”
However, the prospect of sanctions – particularly the forced retention of 30% of the amounts of international bank transfers a financial institution in violation of the provisions of FATCA, – has forced Russian officials to adjust the attitude of the law.
Now, however, Moscow is not only ready to negotiate the points of American law, but also proposes to extend its provisions to all countries in the OECD. In addition, the Russian authorities insist on automatic exchange of information between tax authorities of different countries.
“If Russia will enter into agreements such as FATCA with other countries, including offshore companies, it is obvious that the Russian evasion of tax payments will be more difficult,” – said the director of the Moscow office of Tax Consulting UK Edward Savulyak.
So far, although Russia can deal with the exchange of tax information with other countries, processes are not efficient, he states.
“Since we share information only Germany, the Czech Republic, Italy, Cyprus, Switzerland – and the next year, you see, will exchange Luxembourg and Malta. Notorious No Seychelles, Bermuda or the Caymans,” – said the expert.
The course of the signing of the agreement with the U.S. on FATCA, according to experts, selected the right, but in fact it means that Moscow “will play to U.S. regulations”: “We will respond to their requests, and we ourselves shall ask them to respond in a similar manner to our requests. ”
Find others whatsoever, and strengthen cooperation in the exchange of tax data – and most importantly, the creation of an automated system such exchange – has long been overdue, recognize the parties.
“The lack of co-operation between States in the field of data on foreign taxpayers, creates the conditions for tax evasion,” – says the president of the nonprofit Partnership “National Payment Council” Andrey Emelin.
Between countries, of course, there are bilateral agreements on exchange of information. In Russia, for example, the order of such agreements with 80 different countries.
But to carry out such requests is very difficult from an administrative point of view, says the head of the tax practice of “Yakovlev and Partners” Catherine Leonenkova.
“It takes a lot of time before you can get the data. Besides, you do not know from the outset whether a particular person accounts abroad or not,” – she said.
Improving all the difficulties with tax evasion using offshore companies in Russia, the situation in the area of tax administration in the last five to ten years has greatly improved, experts say.
In the World Bank’s Doing Business country has risen in “Tax Administration” from the 105th to 64th position.
“Screw the nuts cool here, – says the head of the Moscow office of Tax Consulting UK Edward Savulyak. – But from America, Germany or England, we still are different: we shy away easier than theirs. But we grew up with two or three heads.” (ed.: unclear what this means).
However, he adds, the growth ranking positions is due to the improvement in tax collection from businesses, not individuals: this improvement often turns into a tax smothering medium and large businesses.
That’s why some wealthy foreigners like actor Gerard Depardieu will gladly take Russian citizenship, but international companies such as Google or Amazon are not chasing the Russian residence permit, summarizes the expert.”
Foreign Account Tax (Foreign Account Tax Compliance Act – FATCA) was enacted in the U.S. in 2010 and entered into force on 1 January 2013.
Thus, the U.S. government tried to counter tax evasion through offshore companies because of which the country’s budget, according to some, received less of the order of 100 billion dollars annually.
The essence of the law is that foreign financial institutions – including Russia – are to conclude a special agreement directly with the Internal Revenue Service of the United States and inform it about the opening of accounts by U.S. taxpayers.
If prior to December 31, 2013 the agreement is not signed, the U.S. government can keep 30% of the amount of international bank transfers of a particular financial institution.
Often such agreements are contrary to national laws of states, so a number of European countries – France, Germany, Italy, Spain, UK and the Netherlands – have reached an agreement with the U.S. government about the format of participation in the FATCA at the government level.
The same intergovernmental agreement will be discussed at the talks between Russia and the United States.
Both measures, experts say, are aimed at combating tax evasion through offshore zones.
The following article seems to explain it pretty well:
Russia wants model II. The article says that FATCA was strongly rejected in 2012 but that such opposition evaporated in 2013.
I wonder what the correct translation of this is, or what implications this may have:
” even impossible for banks to work on U.S. accounts, accounts opened in the U.S., etc. ”
A Reuters Opinion article mentions: “Russia also has begun negotiations with the United States to ensure that its financial institutions are FATCA compliant.” I wonder what the source of this writer’s information is or whether it is just wishful thinking on his part:
Article: “Common ground for Obama and Putin is offshore”
Although time will tell, I do not believe that Putin will surrender some of Russia’s sovereignty to the US.