If Cyprus can dip into people’s private savings, how safe are we?
“We continue to monitor the situation in Cyprus, which remains fluid,” said Kathleen Perchaluk, spokeswoman for Jim Flaherty, the Canadian Finance Minister. “It is important that the Europeans take the necessary steps to deal with sovereign debt issues while securing financial stability. The situation highlights the importance of Europe advancing efforts on a full banking union, which they have been making progress on.”
Experts say Canadians have little to fear they could ever face a similar penalty, given the strength of the Canadian banking system and the relative strength of the Canadian economy.
“The World Economic Forum has ranked Canada’s banks as the soundest in the world for five years in a row and Canadians have confidence that their deposits are safe and sound,” said Rachel Swiednicki, a spokeswoman for the Canadian Bankers Association.
Switzerland imposed negative interest rates in the 1970s to discourage foreign investors from piling up on the Swiss Franc and there has been frequent talk over the past few years to do the same. This would pretty be the same thing that is happening in Cyprus, but with a reversed logic and intent.
the spokesperson for the CBA said; …..”and Canadians have confidence that their deposits are safe and sound,” said Rachel Swiednicki, a spokeswoman for the Canadian Bankers Association.
Oh really? What about the deposits of Canadian citizens and residents who the US deems to be ‘taxable persons’ under FATCA – especially for those ‘recalcitrant’ account holders? What about that potential 30% witholding penalty on ‘recalcitrant’ account holders? How ‘safe’ are > 1 million Canadian accounts under FATCA?
…..”…In summary FATCA requires a PFFI to:
…………….. withhold and pay to the IRS 30% of all US sourced payments made to NPFFIs or recalcitrant account holders….” from http://www.kinetic-partners.com/Newsmedia/Insight/2013-02-22/FATCA-Issues-for-private-equity-firms/
And in this Cyprus example, did they cut the pay and bonuses of the bank officials and shareholders – who when business was booming, ran off with the profits, and now want a bailout? What a scam banks are pulling all over – in Canada, through an IGA the CBA wants ALL Canadian taxpayers to fund FATCA compliance so they can get on with figuring out how to make a profit from it. In the US, they’re deemed ‘too big to fail’, and ‘too big to prosecute’.
The banks merrily run whatever schemes they can come up with – and then come to the government and taxpayers with their hands out when things come crashing down. They didn’t share the profits with account holders and the rest of us, so we shouldn’t pay their costs and prop them up when they reap what they have sowed.
@badger, good point. I can understand and support paying more to reduce understandable debt for the better of a nation. Yet, to spend more to finance the failed investments of profit-seeking banks? That’s no different from giving change to a drunk, alcoholic beggar, hoping that he won’t buy beer with it.
You wrote, “in Canada, through an IGA the CBA wants ALL Canadian taxpayers to fund FATCA compliance so they can get on with figuring out how to make a profit from it.”
and confirmed by Stephen Mopsick’s “Report on Miami FATCA Conference”:
“The overriding sense of the conference concerned how to use FATCA as a business and growth opportunity. All over the world, there is a race between mega-corporations, giant financial institutions, CPA firms and business leaders to get ready for FATCA and position themselves and their clients into the best posture possible over their competitors to ensure that FATCA spells financial success.”
The Brownshirts also had their pep-rallies.
@bubblebustin, Mopsick’s comments – which echo some of the FATCA Compliance Complex language, just makes even clearer what this is all about. It’s about who can get access to tap our hard-earned legal and post-tax money – to profit the US Treasury and ALL the banks – wherever they might be located.
The story about Cyprus – is a warning story about how governments believe that the citizens only exist to serve them and their corporate friends.
FATCA could be only the beginning – if the US gets entrenched in Canada, basically they own us and our children even more than before.
That plus these plans for the mega database of people’s accounts inside the US – “….The Obama administration is drawing up plans to give all U.S. spy agencies full access to a massive database that contains financial data on American citizens and others who bank in the country, according to a Treasury Department document seen by Reuters…….” http://www.reuters.com/article/2013/03/13/usa-banks-spying-idINDEE92C0EH20130313
They are just running mad, drunk with power and fuelled by greed.
@swisspinoy, if the banks are ‘too big to fail’ and ‘too big to prosecute’, they just look at penalties and fines as a built in expense necessary to incur on the way to turning a profit.
“They are just running mad, drunk with power and fuelled by greed”. We can add ‘desperate’ to that.
The direct confiscation of bank deposits in Cyprus is just a more visible example of methods that governments use to confiscate savings. Here is a post on this principle that identifies numerous ways that governments can and do confiscate savings/assets.
Direct confiscation of assets works only if people have SAVED assets to confiscate! The word “assets” should be replaced by the word “savings”.
But how do you identify those with assets? How do you locate the “fruits of the saving”?
Answer: If you are the U.S. government you let FBAR and FATCA 8938 do the work for you. If FBAR and FATCA 8938 are not used to identify assets/savings for confiscation then what are they for? There is one answer: fines and penalties which are another way of confiscation of assets/savings.
The assets of U.S. citizens abroad will be the easiest to identify and there is no doubt that the U.S. government will attempt to confiscate them. (After all, U.S. citizens abroad are by definition “tax cheats” – the offshore versions of Timothy Geithner. This was explained by Barack Obama and Timothy Geither as a prelude to FATCA.) These assets will be the hardest to expropriate. They are located in other countries.
This may not be as brazen as what Cyprus has done (note the use of the world “may”). There are other ways to confiscate assets and these methods are already being used. It is important to recognize them.
Estate Taxes: Why should the family business be able to be passed to the next generation?
Wealth Taxes: It’s just not fair that some have more than others.
Exit Taxes: U.S. citizens who wish to buy their freedom must pay the U.S. government in return for letting them go. (Didn’t slavery come to an end at the end of the Civil War? But, then again, the 14th amendment (which was intended to provide equal citizenship to the slaves is now used to create slaves of anybody born in the U.S.)
Fines that are described as taxes but are really fines: Best example are the PFIC rules. If this were really just a way to tax deferral, the owners of mutual funds would not have been subjected to the highest personal income tax rate but would have been subjected to normal capital gains rates.
Low interest policies which ensure that one cannot get a return on cash: Pity those conservative investors who saved for retirement. Once again a benefit for debtors at the expense of savers.
Inflation: The friend of all fiscally irresponsible governments. Inflation erodes the value of cash. The late Sir John Templeton used to refer to the “folly of holding cash”. Even with a decent interest rate, his point was that government spending caused inflation which eroded capital. He also made the point that sooner or later the spendthrifts would be owned by the thrifty.
The way in which the tax laws are administered: An Alaska enrolled agent recently wrote a post explaining why he believes the IRS is stealing from taxpayers.
Financial terrorism: Seriously what do you think the IRS attack on U.S. citizens abroad is? Pay us 27.5% of your assets and we will let you alone. Actually, as we know the IRS can’t even be trusted to abide by the terms of OVDI.
Note that with the exception of “wealth taxes”, the United States is a “world leader in confiscation”.
Notice that each and every one of the things described in this list is an attack on the principle of saving! Not income but saving! In other words, as usual, governments are doing the exact opposite of what they should do.
Moral of the story: Stop saving. We are in a new world. Those who will do the best will be the ones who recognize that we are heading toward a new definition of wealth.
My suggested definition of wealth:
The ability to enjoy life without fear of government and to be mentally and physically fit. For U.S. citizens abroad who want to enjoy life, consider renouncing U.S. citizenship. It’s a Brave New World! Get used to it. Invest in your ability to learn, appreciate and enjoy life. Take steps to minimize the ability of the government to confiscate those precious things. Those who learn to live comfortably on the smallest amounts of money will be wealthiest.
In a world where “all roads lead to confiscation”:
“Your education is the only thing somebody can’t take away from you.”
– the words of a wise Eastern European immigrant
I agree that education is something you should invest in.
As recently as March 2013 the Bank of England has considered negative interest rates.
This is certainly a confiscation of the benefits of saving!
I just got back from a 5 week trip to India and I concur with your statement that “Those who learn to live comfortably on the smallest amounts of money will be wealthiest”, which for many would be a brave new world, but certainly not for millions living in the world’s largest democracy!
Sorry not following you – India is the world’s largest democracy. Please clarify I am interested in your experience in India.
There is a slum in Mumbai which is described as the world’s largest slum. Thing is that everybody is happy there. The more people have the more they have to worry about and account for.
FATCA compliance in Canada is probably illegal and unconstitutional, whether we are talking about financial institutions or the Government of Canada. So what happens if the US imposes a 30 percent withholding tax on US dollar payments?
Canada has investment porfolios of about US $400 billion. The 30 percent surtax amounts to about $133 billion, which would be collected sooner or later as bonds mature, estates are settled, etc. The financial institutions would try to pass this on to their customers of course. But what if they are unable to do so? The six largest Canadian banks had an excellent year, making $6.6 billion in profits. (I have no figures on other financial institutions, including in particular insurance companies.) How solvent will they be if hit with massive confiscations by the US? How’s that for a scenario for a run on Canada’s banks?
Thank you for asking. While travelling I wrote, ‘Most of India hums with a collective mind. It is a country where everybody and nobody’s important. It confounds, yet is infinitely wise…and just when it threatens to infuriate you beyond your forgiveness, it manages to redeem itself in some remarkably splendid way.’
For a country that’s as crowded as it is, there seems to me to be endless room for everybody and everything and a purpose for everyone. I guess in a country that populated, there’s little alternative to getting along, in fact, my impression is that they love to interact with each other. Example, when stopped for a train, instead of staying on their correct side of the road they jockey for first position on both the right and wrong sides of the road and after the train passes it’s a gigantic gridlock that involves everyone happily playing a part in solving the puzzle. Remarkable, really. While being driven, I was prepared to meet my maker in a head-on collision, and truly thought that the last word I would ever read would be ‘TATA’ (Indian truck manufacturer). Ta-ta!
You are absolutely right to (albeit indirectly) compare Cyprus’ deposit levy with the US’ methods of extraterritorial taxation. Cyprus steals your savings, France taxes at 75%, and the US insists on double taxation and FATCA.
The sheer idiocy of Cyprus’ leaders is breathtaking however. Up till now at least the US has been able to mostly get away with its tax evilness, claiming uniqueness, fighting “the good fight” against tax evasion, and so forth. Even if Cyprus doesn’t enact the levy, this very proposal from its own president has all but destroyed its banking industry (luckily it might keep some tourism afterwards). Imagine if they tried to pull that here in Switzerland and what it would do to the country.
Merkel et. al. are completely in the right to demand that Cyprus pay its own way. Enough of this socialization of losses. The real idiots are the Cypriot president and his cabinet. These guys are completely mad and will ensure Cyprus’ impoverishment. If Cyprus cannot manage itself correctly it has no business being in a monetary union. Upon hearing the demands of the Troika, and knowing he could do nothing, the President should have resigned instead of trying to rob his countrymen’s savings as a last resort to save his job.
If they can’t pay their way, Cyprus should pull an Iceland, closing its banks are redenominating its currency. It should throw its banksters (and politicians) in prison and relinquish all claims on being some kind of offshore nirvana.
Why Cyprus is important to Canadians:
“4 reasons tiny Cyprus matters to Canadians
By Pete Evans, CBC News
Posted: Mar 19, 2013 11:55 AM ET ”
Now where is the CBC story on the FATCA version and the possibility that Flaherty and Harper are giving the IRS access to the accounts of > 1 million Canadians in order to bail out the US domestic debt?
“Why FATCA is important to Canadians?”
Just to throw a couple more articles into the mix on the developing Cyprus Story….
This is a fun blog to read…
Cyprus Updated. Cost Of Deposit Tax.
“This will turn into a) a farce b) a revolution c) a farce of a revolution”
and then this more disturbing news out of New Zealand which has gotten a lot of twitter action down under…
National planning Cyprus-style solution for New Zealand
And this… from Bruce Krasting
How Black Accounts Work – A Cyprus Connection?
A central criticism of the decision to seize a portion of the bank accounts in Cyprus is that the “bite” hits small guys who have accounts with a balance of less than E100k. As I write, it appears that there will be some revisions to the deal that was announced over the weekend. Those changes will likely minimize or eliminate the hit on these “smaller” accounts.
It is a travesty (and a crime) if Cypriots who live and work in the country have a portion of their accounts clipped. The small guys were not part of the problem, so they should not have been part of the solution. This obvious conclusion begs the question, “Why did they do it in the first place?” There are two possible answers:
read more here..
Bruce Krasting is full of shit. He is trying to label people who keep a limited amount of money in an account linked to a debit card as some kind of crooks. Anyone with a degree of common sense would not keep a lot of money in an account that can be directly accessed by a debit card.
Debit card fraud is very common, particularly in Europe. Tech savvy thieves skim data from debit cards using special devices attached to ATMs and mini cameras to read pin codes as the user punches the keypad. Then they clone the cards and use them to clean out the accounts.
Contrast the problem with profits predicated on providing bank secrecy to a large percentage of ‘foreign depositors’ in Cyprus banks, with the problem in Florida and Texas with their reliance on providing bank secrecy for a large percentage of ‘foreign non-US depositors’ – which they don’t want to report on (under the US domestic part of FATCA) or lose, as one of the US’s very own domestic tax haven states;
“I think the U.S. thinks that they’re not a tax haven.”
Foreigners might see things differently. Nonresident aliens own as much as 90 percent of holdings at some U.S. branches of foreign-owned banks, Florida’s former banking Commissioner J. Thomas Cardwell told IRS officials last year. Banks don’t want to lose the foreign holdings, which generate income and can be loaned out, and some might fail if U.S. rules get tougher, he predicts.
Cardwell concedes that foreign governments might want to know about taxable income here.
“That would be an argument, that these foreign countries need to enforce their own tax regimes,” said Cardwell, a Washington lobbyist.
That’s not our problem, argues Alex Sanchez, president of the Florida Bankers Association. Secrecy was meant “to encourage the flight of capital to the United States. … It’s good for the United States.”
……….Sanchez contends it’s not the business of the IRS or American banking officials to help other countries catch criminals. “I’m not the world’s policeman,” he said.”
Here is discussion of the high proportion of Cyprus’s bank accounts that belong to Russians
a description of the proportion of Cyprus banking that is thought to belong to Russians and others looking for a tax haven;
……….” Another problem is Cyprus’s dubious banking history. It is a tax haven for Russian, European and Arab investors. Proof of that is seen in its disproportionately large banking system. Bank assets are more than five times the size of the country’s GDP and 37 per cent of bank deposits are held by non-residents.
Russian investors have $31 billion in deposits in Cyprus. Along with tourism, global banking is a pillar of Cyprus’s economy.
Kyle said Cyprus is “like the Cayman Islands” of Europe. “It is an offshore money-laundering centre … the Russian mafia launders lots of its money through there,” he said.”……..
And here are Texas banks:
…………”Some Mexican nationals are already pulling out their money. And that scares banks, according to John Heasley with the Texas Bankers’ Association. His informal survey suggests Texas banks hold at least $20 billion in deposits from foreigners — and most of that comes from Mexico.
John Heasley: Many banks have 40, 50, 60, 70 percent of their deposits. Obviously it is more extensive in places like Laredo and San Antonio. If that kind of capital leaves, it could cause a liquidity crisis.”……….. from http://www.marketplace.org/topics/economy/mexicans-worried-about-disclosure-rules-us-banks
and see also: “……..The Texas Bankers Association is considering a lawsuit against the government to stop account-holder information-sharing with Mexico, said Eric Sandberg, the group’s president.”……. http://www.theglobeandmail.com/report-on-business/international-business/us-business/foreigners-accounts-in-us-banks-eyed-in-tax-crackdown/article8207084/?service=mobile
So, will the US actually force Florida and Texas banks to disclose information on their foreign depositors in a pseudo-reciprocity used as bait to lure countries into a FATCA IGA? And if those depositors pull their money – which Florida and Texas banks are reliant on, then will the US government prop up those US tax haven banks with a bailout from US taxpayers? Since we in Canada and all other countries in the world are defined by the US as ‘US taxpayers’ no matter where we live or were born, or hold other citizenships, we too would be among the ‘US taxpayers’ tapped to pay for Florida and Texas tax haven bank bailouts – as well as having our own local account privacy breached in our home countries, and compromise the personal financial information of our non-US households and employers – under FATCA and the BSA.
This article may or may not be reassuring to Canadians. Here’s a quote …
“The [Canadian] bail-in regime is to protect both taxpayers from having to bail out banks and depositors from having to take a financial hit like we’ve seen in Cyprus,” Perchaluk said. “If a bank is having severe difficulties, the bail-in regime would force certain debt instruments to be converted into equity to recapitalize the bank.”