From MEP Sophia In’t Veld
The United States Foreign Account Tax Compliance Act (FATCA) requires that foreign financial institutions register with the US Internal Revenue Service (IRS) and promise to identify, collect and report information on US clients’ offshore bank accounts. According to Financial News, entities must register by 25 October 2013 in order to be included on the IRS’s list of compliant institutions to be released in December 2013(1). In order to facilitate this process and ease the burden on financial entities, a number of countries have embarked on negotiations on so-called intergovernmental agreements (IGAs) with the United States on how to implement FATCA rules.
1. Can the Commission clarify which Member States have to date concluded IGAs on FATCA?
2. Can the Commission clarify on what legal basis it is ‘coordinating’ the bilateral agreements and conducting talks with the United States? What mandate does the Commission have to engage in talks with the United States?
3. Can the Commission clarify whether these IGAs can be modified or suspended unilaterally by the United States?
4. Can the Commission clarify whether, in its view, the reciprocity clause does indeed mean complete symmetry?
5. Can the Commission clarify the situation for foreign financial institutions from Member States that have not concluded an IGA? Would the foreign financial institutions in these countries be at risk of violating European law, notably data protection law?
6. Can the Commission clarify whether the European Data Protection Supervisor and the article 29 Data Protection Working Party (WP29) have been consulted on the model agreements, and whether they approve?
7. Can the Commission explain how FATCA and the IGAs relate to the new EU proposals for fighting tax avoidance and tax evasion?
8. Can the Commission clarify whether, once the Savings Tax Directive is in force, the United States could theoretically gain access to data from all the Member States through a handful of bilateral agreements?
9. Can the Commission clarify whether it has conducted an assessment of the financial, administrative and economic impact of the FATCA on European businesses, and whether European businesses are potentially at a competitive disadvantage compared to their US counterparts?
and the response from the EU Commission
. So far, the United Kingdom, Denmark, and Ireland have signed FATCA Model 1(1) intergovernmental agreements (IGAs) with the US, while Germany, Spain and Italy have initialled such IGAs. .
2. The US is negotiating with each Member State on a bilateral basis; the Commission is not involved in these negotiations nor is it coordinating them. .
3. A FATCA IGA may be amended by written mutual consent of the Parties; either Party may terminate the IGA by giving notice of termination in writing to the other Party. .
4. The reciprocity clause included in the Model 1 IGA commits the US to achieving ‘equivalent’ levels of reciprocal automatic information exchange with FATCA partners. .
5. See response to Question E-2760/12. .
6. The Commission consulted the article 29 Data Protection Working Party (WP29) on FATCA and the Model IGAs. The opinions provided by the WP29 can be found on the Europa website(2). .
7. FATCA and the IGAs, as US initiatives, are not part of the recent Commission Action Plan(3) to strengthen the fight against tax fraud and tax evasion. However, the Model 1 IGAs are in line with one of the proposed actions i.e. promoting the automatic exchange of information as the future EU and international standard of transparency in tax matters. .
8. No, that will not be the case. .
9. The Commission has not conducted such an assessment but several EU businesses have done so(4). FATCA IGAs will also affect US businesses which will be required to act as withholding agents and also to report certain information about EU residents.
the “EU business” referenced in footnote 4 is KPMG.
On response number 4, there is a colloquial phrase used here in my adopted land:
What a load of bollocks.
There is no such commitment without legislation as per the letter from Treasury to Rand Paul.
….Miller also noted that the IRS made significant progress last year on international enforcement, specifically in its efforts to combat the practice of illegally hiding assets and income in offshore accounts. “We have continued our two-pronged approach: offering a voluntary disclosure program for those who want to come in and get right with the government, while at the same time pursuing tax evaders and the promoters and banks assisting them,” he said…………
……Citigroup has 60 days to submit a plan explaining steps the bank has taken to boost its compliance efforts…….. I think they should talk to Mopsick about their compliance efforts.
Isn’t FATCA just a reflection of the broken state that is America today? For decades, the US’s negligence in encouraging, educating and enforcing tax compliance among its citizens and green card holders living abroad has resulted in a condition where tax compliance is shamefully and predictably low. Against this backdrop, FATCA, already extreme, becomes a devastating over-correction in policy for those already suffering from the abuse of neglect. The conditions we find ourselves living with today rest squarely on the shoulders of a dysfunctional US government, and those who’ve been running it not only today, but for decades. The US punishing its expats for non-compliance is about as humane as outlawing poverty.
I totally agree. That’s a mighty powerful statement that should be used in the advocacy efforts. Excellent, excellent summation.
Thanks, Calgary. I was actually thinking of including it in my submission for US tax reform re:
House Ways and Means Committee Discussing Tax Reform at Full Speed Now!
@Bubblebustin, excellent comment. I fully agree that it would have seem much less unfair of the U.S. to take its current stand had adequately communicated to everyone concerned about our continuing tax compliance obligations. Instead, they have essentially entrapped multitudes of innocent U.S. Persons abroad.
But what amazes me is how expats I know STILL don’t believe the potential problems they could be facing in a few years, assuming FATCA is fully implemented. They think I’m being hysterical. I would like to think that my case was merely an anomalous one (as I was already filing and thus already in the system) and that they will just focus on egregious cases. But who’s to say with them desperate for revenue that they’re not going to go on a blitz and lump us all as probable tax evaders…:/
And who’s to say the US won’t just “pull a Cyprus” on expats so that we too can do our share in getting the US fiscal house in order.
The old saying of “just because I’m paranoid doesn’t mean they aren’t out to get me” comes to mind.
I’m laughing at your comment because I identify so much – beats crying. As a natural born ‘anxiety prone person’, this FATCA mess is the perfect joke on me. Most people look at me like I am imagining things when I try to explain US citizen-based taxation, FBARS and FATCA to them.
Unfortunately (or perhaps fortunately if I twist how I look at it), I have been hit with a couple other kicks of a bullying nature over the last few years, and I am reminded of another saying: ‘What doesn’t kill you makes you stronger’. Soon, I will either be cured of my anxiety or certified crazy!
@monalisa1776, I now know of at least two UK MPs — besides Boris Johnson, that is — who are dual UK/US citizens. To date both have indicated that they don’t think FATCA will apply to them in any way, but neither has said why. It seems unlikely they get the ‘foreign diplomat’ exception. My guess is that they fall solidly into the the category you describe, folk who don’t think it’s going to apply to them, despite all evidence otherwise. But it will. Their difficulties won’t come in future from any IRS ‘blitz’ though, so much as simply being turfed out by their banks, grassed up to the IRS through HMRC, and then finding themselves with a monstrous and expensive back-compliance paperwork nightmare.
By the way, monalisa1776, if you haven’t yet written to my MP then it would be a good idea to get something in as soon as possible. Doesn’t have to be word-perfect; honest and heartfelt is fine. He’s planning to contact Treasury again about this, so striking while the iron is hot seems like the thing to do.
I like that phrase “pulling a Cyprus”. Good phrase to use in reference to FATCA, FBARs, and the US domestic debt. I.e., how they could theoretically be used by the US to levy a tax on our expat ‘foreign’ assets – in lieu of the US tax they can’t currently assess in many of our cases.
I like that phrase “pulling a Cyprus”.
I don’t. While I wouldn’t put any tricks past the USG, it’s a completely different situation, really. Explaining things to people who have no idea about FATCA, FBARs, exit tax, criminalization of expats and anything non-US is difficult enough without making false comparisons. Just my opinion.
@Watcher, will do.
@notamused, I see your point in terms of using the phrase “pull a Cyprus” when explaining our situation to others.
For myself though, with a better understanding of the issues, personally I think there are viable connections between the two scenarios;
True, our situation is not an exact parallel, but the phrase “pull a Cyprus” speaks to my own sense of our Canadian households’ local, legal, post-tax savings being exposed without just cause, to (layered) threats of levies engineered by (US) government schemes – from afar. That they are penalties or ‘withholdings’ rather than a flat levy doesn’t dissuade me, as the US has only a pretext of a reason for creating or exercising powers to seize or penalize my local accounts based on a percentage of the balance (using the BSA for FBARs, and the HIRE Act and etc. for FATCA).
These potential levies on our accounts include: extortionate FBAR penalties; which can be levied at levels which exponentially exceed balances – retroactively; and confiscatory withholdings via FATCA penalties; 30% withholding levied on US source funds from the accounts of recalcitrant account holders + Form 8938 penalties. These can be levied on assets even in the absence of any tax owed, or criminal wrongdoing.
I am almost powerless to prevent the US from doing this. Like the funds of the local Cypriot citizens, my Canadian assets aren’t from illegal sources, and no tax is owing on them, yet the (US) government (which is ‘foreign’ to me) from afar, gave itself – and now via IGAs, delegates to banks – the ability to exercise powers to seize a portion of my assets – without due process or just cause.
For the Cypriots, the levy is being imposed without their vote, or agreement. And originally, it applied to ALL accounts, no matter how small. It wasn’t progressive or prorated, it was simply an across the board percentage. I have no effective vote or political influence in the US, and I did not agree to FATCA (or FBARs) but for my local accounts, if I am a recalcitrant account holder, a FATCA withholding of 30% on US source funds applies, and does not have any relationship to my income or a means test.
My local account balances have no relationship to any US tax bill and no relationship to or responsibility for the creation of the massive deficit that threatens the viability of the US – including the portion created by US politicians bailing out the ‘too big to fail and too big to prosecute’ profiteering US banks (some of whom are engaged in money laundering and benefit from sheltering money deposited by non-resident foreigners – some of which is likely connected to tax evasion and criminal proceeds). The ordinary Cypriot accounts also had no connection to Cypriot bank speculation and profiteering – they received no profits, so why should they pay to bail them out?
So, I still personally think that the powers of the US government – to levy a substantial withholding on my everyday local accounts via FBARs and FATCA – though they have no relationship to a crime, to profiteering, to a tax bill, or to the national debt – is reminiscent of ‘pulling a Cyprus’.