Press silence continues in New Zealand related to FATCA and IGAs. The last article I have seen, anywhere, was this posting back in October, 2012 on Interest. co. nz. Title: “New Zealand will seek to negotiate tax information agreement with US over ‘FATCA’ law NZ banks had feared would cost them NZ$100 mln” (If the link only takes you to the front page, just do a search on their site using the title, or FATCA.)
I have been in correspondence with a Kiwi/US dual citizen, who made a submission to the NZ IRD ‘working group’ to provide comments about why New Zealand should NOT sign up to a FATCA IGA. I will not post his submission in the interest of brevity. However, below is their response back to him which was NOT encouraging. Names and personal references have been eliminated to protect the innocent! 🙂
We appreciate the time that you have taken to write to us again and we acknowledge the points that you have submitted to us.
We are not in a position to comment on the structure of the US tax system and how its taxes are levied, or what penalties are imposed for non-compliance. In this respect, it is important to recognise that FATCA does not impose any additional taxes, it is simply a mechanism through which the US can better enforce its existing rights.
Noting your situation as dual citizens and also being resident in New Zealand, you may be entitled to relief on certain income under the double tax agreement. Although this agreement may not eliminate your US tax and filing obligations, it does go some way to ensuring that the same income is not taxed twice by both countries. If you have not done so already, we would recommend looking into obtaining tax advice.
Any intergovernmental agreement would be an extension of the existing double tax agreement and would build on its information exchange mechanism. Once any tax treaty has been signed and is in force, it cannot be changed unilaterally – all changes must be made by mutual agreement or by renegotiation. This rule would also apply to the intergovernmental agreement.
With respect to the existing double tax agreement with the US, there is no full “assistance in collection” provision. This means that we are not required collect taxes or penalties on behalf of the US Government. The only situation in which we may be required to collect money on behalf of the US is when a taxpayer has claimed treaty relief that they are not entitled to. As mentioned above, the double tax agreement may not be amended unilaterally so this provision is unlikely to change.
A major motive in negotiating the intergovernmental agreement, as noted in our previous response to you, is the possibility to negotiate an exemption for KiwiSaver and other certain retirement products from the scope of FATCA which would otherwise be caught. This would protect the retirement savings of New Zealand residents, as the scheme providers would not be required to undertake any identification or reporting procedures as would otherwise be required by FATCA.
Further to our previous correspondence, the final FATCA regulations were released by the US last week. In absence of an intergovernmental agreement, the financial sector would be required to meet the requirements set out in those regulations and even those in the industry without a direct relationship with the US would find it difficult to fully avoid FATCA once the full withholding obligations are in place. For these reasons the financial services sector in New Zealand is strongly behind the negotiation of an intergovernmental agreement.
I trust that my comments are of assistance.
He has written back to them with good arguments against their assertions, but they have not further responded. I am really not sure from reading this whether they think the IGA is a Tax Treaty or not, but they seem to indicate that it would be treated the same. That makes for a good belly laugh, doesn’t it? I am not sure that they understand the dubious legal pedigree of these “agreements!”
If they are still talking to the IRS, I would bet they are getting a lesson on how bi-lateral the IGA actually is. Just try to change the boiler plate of FATCA IGA Model I, and that will give you a reality check! Our Kiwi friend has done his best to educate them, about the unilateral nature of the FATCA cram down, and how the IGA represents a Tax Treaty override. However, they probably have taken no notice.
I hate to say it, but there does seem to be a compliance mind set that represents a fairly passive acceptance of American dominance here, at least in the bureaucracy. Notice their assertion of “US can better enforce its existing rights”, with no concern about Kiwi Citizenship rights! This is a long term resident Kiwi Citizen, for god’s sake, that is writing them. Not just a whinging American like me! But, because he is ‘dual” and also considered a “U.S.” Person, they seem to care not one whit! Their response, “Obtain tax advice.” Not our problem. You have no Kiwi rights! They don’t even seem to respect or understand the ideas of dominant nationality.
Note the two lame reasons they give for going the IGA route.
1. Exemption for Kiwi Saver, which frankly was already provided for in the Final FATCA FATWA rules, so they don’t really need an IGA for this anymore!
2. Lobbying and support by the Financial Community for a New Zealand bailout of their industry. They want to impose the FATCA requirements across all financial groups equally (with what exemptions they can get ala UK Model I annex) without them having to make a business decision as to whether or not to be FATCA compliant. They really do not want to let the market and the customer decide what kind of bank they want. (These guys are never free marketeer Capitalist as they would like you to believe) If you have to throw 60,000 U.S. Persons (even if they are Kiwis) under the bus and hand them over to the International Revenue Service,(IRS) so be it! Bottomline, Bankers have no morals! If they have to sell out for 30 pieces of silver, so be it.
There continues to be press silence in NZ, as to where the IRD is in the process. No one is interested or reporting anything. FATCA searches on New Zealand Herald (the newspaper of record) turn up this. In Wellington, the Capital of NZ, the Dominion Post turns up this result. Even on the IRD, your FATCA search result is nada.
Not sure when the results of the IRD ‘working group’ will be presented to Finance, or Parliament for discussion, approval or modification of NZ privacy laws. Let’s hope that at least the NZ Greens will oppose, ala Canadian Greens.
Probably the next thing we will hear, is that New Zealand has signed or initialed an IGA. It will listed on the Treasury Press Release page as a new IRS triumph against “offshore tax cheats” in that tax haven, New Zealand, and journalist will just repeat it verbatim without a skeptical question. That is my expectation.
The days of NZ resistance to “American will” (ala nuclear ship ban) seems to be part of a distance 1984 history. If anyone has seen anything in NZ media that I have missed, please post it.
I guess it was inevitable that after a couple of good news days there would be bad news. This time from one of my favourite spots on earth, New Zealand. The get thee to a tax expert and don’t bother us with the truth attitude is getting tiresome. Thanks a lot Just Me. 🙁
I don’t understand why government’s seem to be patting themselves on the back for securing a reporting exemption for certain tax deferred accounts. I presume Kiwi-Save is a bit like an Individual Savings Account in the UK. The fact that an ISA is not reportable by my ISA provider does the square root of sweet FA for me. It’s still reportable on my 8938 and it doesn’t save me from PFIC treatment of a “tax-free” account. The only beneficiary of the exemption is the FFI who has slightly less reporting to do. If governments contemplating IGAs really want to do something useful, get the US to recognise all the tax deferred vehicles and treat them as such ie not subject to US taxation on capital gains or income until withdrawn. At least then they would be securing something useful in exchange for causing US person residents to be deprived of data protection/privacy rights applicable to every other resident.
Not that it makes it right by any means, but I wonder as to the number of dual citizens in NZ? It seems that the banks everywhere will be pushing for the IGA’s and they are listened to whereas we, the little guys are not.
I know virtually nothing about NZ so please forgive the ignorance.
How very disingenuous – to say that “…..FATCA does not impose any additional taxes it is simply a mechanism through which the US can better enforce its existing rights……”
Yeah right, and; the FATCA noose helpfully placed around our necks by our non-US country OF BIRTH or NATURALIZATION (with the banks cheering on the sidelines and slapping each other on the backs ) won’t strangle anyone until the US hangs us – in the name of ‘existing rights’?
And what about our ‘existing rights’? Do we have any at all – via the US, and via our other non-US country of citizenship? Apparently, we have zero rights – in either country.
Makes the banks, NZ and any other country who goes along an enabler, and an accessory to the crime.
They’ve drunk the US koolaid – when they say it is merely an extension of the existing treaty – as we know this is BS. But they obviously don’t want to inquire or look at that too closely.
And the shortfalls in the existing treaties – which we your government negotiated on your behalf, and didn’t object to on behalf of our own citizens and children – with the customary US savings clause and the US just in time rule, and the US loopholes that allow and enable US double taxation – too bad NZ citizen, too bad Canadian children – your wellbeing means nothing when weighed against access to the US financial markets.
All of us in every country will be facing these same bs arguments – framed the same way. And the wording is so similar – because the US Treasury and the IRS is writing the script.
It’s like saying “FU” to your citizens – you’re a US person – your birth citizenship on autonomous NZ soil, your Canadian citizenship oath, your country of permanent residence and the local production and site of your assets mean absolutely nothing to us. We’re eager to elevate US law and enable US injustice over our own sovereign laws, our own sovereign society, our own native born children, our own citizens.
As you said Just Me, they’ve taken the 30 pieces of silver. And seek to rationalize it.
They aren’t even looking for their own laws that tell them that it should not or cannot be done. They may very well have researched them – and worked out the arguments they’ll use to get around them – should anyone inquire loudly enough.
They aren’t searching out the constitutional scholars who will tell them why and how it cannot and should not be done.
And we have to wonder why our major newspapers haven’t pounced on this – given all the efforts made to bring it to their attention. They appear to serve the bidding of the banks and those in power only.
And, they have to know by now how hard it is to get rid of the unwanted US status.
@nobledreamer, New Zealand statistics list that in 2006, there were 10’806 ethnic Americas (people were born, what languages they speak, and their religious affiliations). I would assume that most of these are former slaves who had already purchased their freedom for $450 or less years ago.
Even if they were all still American citizens, 10’806 is a small enough number for any government to easily ignore the human rights of a very tiny and unnoticed minority group.
Flashback – It looks like the Kiwi government is endlessly eager to rat its citizens out to the IRS:
Those numbers seem a bit low. The figures I have seen are about 40,000 duals in NZ, obviously more affected if you count the family members.
Still only 1% of the population, so unlikely to have the government that worried about shafting us.
The attitude and discussion Points are a carbon copy of Sweden. They must be giving out the same koolaid.everywhere they are going. It is simply Amazing that this crap is going on in high tax countries, where there is absolutely no reason for any homelander to ship their Money.
I’ve once said something to the effect, “everyone falls into one of these categories in their response to FATCA: either they don’t grasp it fully, they hate it, or they will profit from it.” I’m going to add another category: those who may partially or even completely get it, but prefer to pass the buck because they either DON’T HAVE THE EYES to see tyranny when it’s presented to them, or THE BALLS to stand up to it when they do see it. Elizabeth May has balls, but she’s obviously surrounded by a bunch of neuters many of us have helped to elect who tell us to “get tax advice”. Any government official in Canada who’s incapable, or worse, unwilling to view us as Canadian citizens FIRST and support our rights as Canadians over the US’s is impeachable, in my view.
Some countries may have to change some of their laws in order to implement FATCA, say the masters in their response to the many concerns voiced by those who will be most effected by it. How flippant. Let’s hope that their view of other nation’s laws as being minor speed bumps on the road to FATCA is a big tactical error on their part.
@Just Me, @all
The strategy seems clear: TAKE FATCA TO COURT!
Citizens of countries like NZ, the UK, Switzerland, Canada cannot rely solely on elected representatives to protect their sovereign interests; the bank and financial industry is too strong a lobby group.
However, all these countries are advanced human rights with legislation prohibiting NATIONAL ORIGIN DISCRIMINATION.
So take take FATCA – and its local enablers – to court.
Sever it the issue from taxation and focus on the concept that, under sovereign local laws, the concept of “US person” has no legitimate standing and is a form of discrimination. And that local banks or governments cannot be arbiters of US citizenship and impose it upon their own citizens; they have neither the qualification nor the legal mechanism to do so. Take it away from the bankers and finance ministers – make it a human rights issue. In the case of NZ, here’s a possible step by step, based on what will likely transpire in Canada:
1) Form a small plaintiff’s group of concerned NZ citizens.
2) Select the most egregious examples: ideally naturalized NZ citizens who’s only US tie is place of birth, with no other economic tie or US nexus.
3) Contact leading NZ human rights lawyers and ask for consultation and an opinion letter. This will likely involve some cost. Give them the Peter Hogg letter as a reference. Find your legal champion. This is a high profile opportunity for the right lawyer.
4) If the opinion is favorable, distribute widely to politicians, banks and the press as fair notice that their actions could be discriminatory, harmful and unlawful.
5) If government or institutions attempt to enforce FATCA, then there is a tort and action opportunity.
This could include seeking an injunction against any discriminatory activity in administration of FATCA while the case winds its way through the system
I don’t know anything about lawsuits, but wouldn’t someone, or in this case, a government have to contravene a law first before they can be taken to court? Is the mere contemplation of entering into an IGA, such as the Canadian government announced it is doing, enough to start an action?
I agree, make it a discrimination issue as the taxation side of the equation just blurs things for a lot of people, as we know by our own politicians reaction to our plight.
The most egregious cases to me involve the developmentally delayed children born in other countries than the US who are deemed US citizens through descent but cannot renounce US citizenship, such as @Calgary411 and @the Animal’s children are. There are other examples, but so few are willing to out themselves in a court case for fear of reprisals by the USG.
Yes to bring some type of legal action there have to be a new law passed or existing law changed. In Canada at least that is nowhere close to being on the horizon. I will try to make a blog post on this later today. My advice to this individual in New Zealand would be to start targeting MPs especially opposition party MPs instead of the civil service.
You are correct: until there is an actual harmful effect (a tort) there is no basis for legal action.
That’s why it’s step 5 out of 5. When Canadian government actually agrees to collect information on certain Canadians based on their place of birth, or when a bank demands proof of national origin for the purpose of unequal treatment, then there are grounds for legal action.
However, expert opinions on the legality of a possible action can be influential to lobby or warn off. So being prepared is a preemptive strategy. Thank to Peter Hogg, Canadians now have a benchmark expert constitutional opinion on FATCA, and this issue is also hitting the radar of other Canadian constitutional and human rights focused lawyers, such as Joe Arvay (Arvay Finlay, Vancouver) and NDP MP Craig Scott (formerly a law professor at Osgoode Hall Law School).
However, in Switzerland, certain Swiss citizens right now are being denied services and otherwise being treated unequally, due to US National Origin. So that is already a possibility there, but I don’t know much about the Swiss legal system or Swiss Human Rights laws, and they do not seem to have the “Peter Hogg opinion” equivalent as of yet.
The situation of mentally disabled Canadian-born Canadian citizens who are accidental Americans due to their parents US status is especially outrageous and appalling. However these individuals are likely invisible to banks under FATCA: they do not have a US place of birth on any of their Canadian ID. So unless they did the paperwork to officially claim US citizenship, and then used a US passport to open a Canadian Bank account, how would the bank know?
FYI, while Canadian birth certificates usually list parents’ place of birth, in Ontario you can get an official pocket-sized short form birth cert that does NOT list the parents place of birth. This is a certified certificate and can be used for any official ID function (passport, drivers license, etc.)
Calgary411 can tell you more about how her son is exposed to FATCA, but I believe many of the disabled share bank accounts with their parents in order to receive benefits. That may be incriminating enough to flag someone as a USP, I would think.
If Canada is ‘nowhere close’ to changing/passing laws that allow FATCA to be enacted, our banks are soon to be between a rock and a hard place. Will they have no other choice but to follow the Swiss and start letting US customers go? The plot is sickening…
@Wondering and bubblebustin,
The way the Canadian bank might know is if the US contacts the bank — my FBARs give the information needed — bank, bank account #, highest bank account balances for my adult son’s Registered Disability Savings Account (RDSP) and the Alberta Assured Income for Severely Handicapped (AISH) Account, both of which I hold as trustee for the financial affairs of my son as he does not have the financial know-how. My FBARs do not show a social security number for my son (he doesn’t have one and was never registered with the US) but it wouldn’t take much to put two and two together that he is my son and that he is an “accidental” American although he was born in Canada, raised in Canada, never registered with the US, never lived in the US, never had any benefit from the US.
ON ONTARIO SHORT FORM BIRTH CERTIFICATES
You can get a drivers license, open a bank account, register for schools, or get an ADULT Canadian passport with a short form birth cert.
Getting a Can Passport for your child requires the long form, which lists parental info – including place of birth.
Having BOTH is good idea: the short form is handy pocket sized and limits possible privacy invasions based on parental info, but you need the long form to get your kid a children’s passport.
I see your point – about following a paper trail to track down and ID. But I do have to ask, is there any motivation or bureaucratic capacity to do so? First someone would have to manually sort through a mountain paper. Then they would have to send an international auditor to Canada to investigate (which would likely require the “courtesy call” permission of the CRA). Sounds complicated, especially for a bureaucracy that had its budget slashed, and is facing layoffs and even possible government services shutdown unless deeply dysfunctional politicians can agree on how to manage $16 trillion (and growing) debt.
And why would they pursue this? There is no prospect of collection. As a Canadian citizen living in Canada with no US assets, your son is most likely judgement proof; the US cannot enforce revenue collection here, and the Government of Canada will not assist in any way because he has been a Canadian citizen from birth. I do realize that it’s the principle of the thing, but in pragmatic terms it seems that you all should just take the position that he is Canadian.
Thanks for your reply. I have believed my son to be “only Canadian” from his birth. Similarly, I was lulled into complacency regarding my own status, having believed for all these decades that, as I was warned, I did lose my US citizenship when I became a Canadian citizen in 1975. (And, we all know the mistakes I made to not be able to claim that “relinquishment” — Exhibit A of what not to do!)
I would love to have the peace of mind of complete resolution re my son’s citizenship status, but I know I won’t. I do feel that I have done everything I can to remedy that, so it is “Don’t Ask / Don’t Tell” going forward. The rest of the family is out and in the process of getting completed Canadian and US tax returns for 2012, then submitting 8854 Forms to completely sign out from the US. If wishes were granted, mine would be that my son and all like him could also be free. 75% success instead of 100%. Through all of this, I count my blessings more than ever that I moved to Canada so long ago.
@nobledreamer and SwissPinoy
Regarding the number of Americans in NZ.
I really do not know. Moby did an estimate of the number of U.S. Persons, and put it at about 60,000, but not sure what ‘meaningfully arbitrary estimation process’ he used to make the calculation.
Where I am, I have few American contacts. I only know 2 others. All my associations are with Kiwis who do not have a clue about FATCA. However, when the discussion of U.S. Taxation comes up, I am always surprised about how many have family members who have U.S. Greencards, or are married to a U.S. Citizen. Some are back in New Zealand now, and some still living in the States. None seem to be aware of the taxation issues unique to Americans. For those that think they would like to get a Greencard and move to America, I warn them off. Going to Australia instead makes much more sense and less hassles.
New Zealand is throwing its own citizens under the bus and providing no protection from US application of extraterritorial jurisdiction. All of this talk about discrimination based on national origin is going to be a very tough road because the highest courts in NZ and elsewhere would have to be willing to stand up and resist the local governments. It will take years and ruin millions of lives. I suppose at a minimum there should be 60K dual NZ/US citizens standing in line at the US Embassy to renounce if this proceeds – and in Canada a million people in line.
@bubblebustin; regarding the Canadian politicians “Any government official in Canada who’s incapable, or worse, unwilling to view us as Canadian citizens FIRST and support our rights as Canadians over the US’s is impeachable, in my view. ” Definitely. Otherwise, it creates and entrenches two classes of Canadian citizens. Not to mention the permanent residents – who we and they need to stand up for as well. And since the letters, e-mails and calls, we’ve already got some indications of where some stand.
@wondering ; “Sever the issue from taxation and focus on the concept that, under sovereign local laws, the concept of “US person” has no legitimate standing and is a form of discrimination. And that local banks or governments cannot be arbiters of US citizenship and impose it upon their own citizens; they have neither the qualification nor the legal mechanism to do so” Totally agree, because in this instance it just happens to be taxation based on citizenship at issue, but it could be anything else now and in the future (including the draft, military service, travel restrictions, registering your children, etc.) . Plus it takes the air out of the slimy rationale being offered that ‘the US has the sovereign right to impose taxation on its citizens as it deems fit’. Then we’re arguing not about the US ‘unique’ system of taxation, but about whether Canada and its government and institutions should be in the business of applying Canadian laws against Canadian citizens and permanent residents – based on a ‘foreign’=US definition and laws.
We cannot leave any of the permanent residents behind in this mess, nor the many who will never be able to renounce US citizenship for insurmountable reasons (ex. compliance issues, cognitive disabilities).
@Tim & all
Those of us who are signed up to get bulletins from Canada’s Dept of Finance keep getting announcements that Canada is negotiating tax treaties with various countries. Any insight into this?
Nothing really new says @Tim but an interesting press release.
“FATCA is part of New Zealand’s commitment as a good global citizen to doing its bit to clamp down on tax evasion and an important way of doing that is through tax information exchange agreements that we regularly enter into,” Mr Dunne said.
“We currently have 37 double tax agreements and more than 20 tax information exchange agreements either signed or already in force.
Also posted here:
I will be checking to see if it breaks onto the New Zealand Herald. They have NEVER written about FATCA, so I would be surprised.
Worst fears confirmed by the IRD
Just updating to reference the newest post on New Zealand IRD adding FATCA to its guidelines