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.