I have been waiting for someone else to pull this important FATCA development out of the comments made earlier in the day and make a blog posting of it. I guess it might as well be me.
Accounting Today’s Michael Cohn has reported on this quoted knee slapper for why FATCA is being delayed:
Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury Deputy Assistant Secretary for International Tax Affairs Robert B. Stack in a statement. “The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.
Note who this Robert B Stack is….. Frequent and regular readers of IBS should know who he is.
He was the one that was trotted out for public testimony at recent EU Parliament Public hearings on FATCA. If you did not hear his comments or read them, you should at least listen to what he has to say about the Administration’s efforts to provide reciprocity for those they are coercing into signing IGAs. Here is the last part of his answer to questions toward the end of the hearing.
And finally on reciprocity, we would simply point out that under our IGAs that are reciprocal, the IRS agrees to exchange information on interest, dividends and other income that is already collect, which is substantial and in some cases more extensive than what has to be, uh, reported under FATCA.
The US recognizes the importance of reaching equivalent levels of exchange, uh, under all our law, that we are getting from other jurisdictions. And the administration has included in its budget proposal a provision that would permit U.S. Financial Institutions to make such equivalent exchanges.
Under the U.S. political system, uh, different from some Parliamentary systems, we need to work that through Congress but we are um, we are committed to doing that. Once we’ve done that, to go to the question of beneficial ownership in Delaware, once we have equivalent levels of exchange, we would expect our own financial institutions would be required to look through entities and report on individuals just as non U.S. institutions are required to do under our IGA.
Notice that he doesn’t mention anything about Congress recognizing the need for equivalent levels of FATCA exchange, or that this was the intention of Congress when they passed FATCA. But nevermind, Treasury and the Administration plan, by ‘hook or by crook’ , to impose a DATCA on all U.S. Financial Institutions (USFIs), on that he is quite clear! Time will tell if he gets his wish, but Representative Posey thinks not and is calling for a moratorium on FATCA enforcement and FATCA IGAs as we should know from the July 4th message of cheer that was posted by @Calagary411
As for the delay, frankly I think that the June 23rd letter to Treasury from SIFMA and American Bankers calling for FATCA to delayed had more to do with this than anything else.
Number 1 on the list was…
1. Further relief is necessary regarding the January 1, 2014 effective date in order to avoid over-withholding due to delays in the promulgation of essential guidance.
7. Foreign branches of U.S. banks should not be subject to two parallel regimes. (§1.1471-2(a)(2)(v)) (IE FATCA rules and FATCA IGA rules)
You can read all of their other reasons for delaying here
Bottom line: Coming on the heels of ObamaCare regulation delays, the IRS is overwhelmed with a regulatory mess of their own making, and this fiasco is not ready for primetime yet.
Moral of the story: it’s really, really difficult to get an international tax regime going on a unilateral basis. There is a story in this about the difference in making a unilateral rule first, and then repeatedly changing it to fix all the problems that inevitably arise, versus sitting around in international networks trying to make sure the rule will work first, before trying to implement it internationally. Empirical project for international law buffs!
Finally, I would be remiss if I didn’t draw your attention to one other part of the Accounting Today story. This shows to me that Michael Cohn is trying to be more than a Treasury scribe and regurgitate their press releases verbatim. I have been critical of him in the past for that, and I do think he is being more careful now to give balance to his reporting. It never hurts when the contra view gets the last word in an article. 🙂
This is not surprising,” Jim Jatra, who runs the anti-FATCA Web site RepealFATCA.com, wrote to Accounting Today. “Treasury’s timetable for getting IGAs signed is far behind schedule. Treasury’s explanation for the delay—‘the groundswell of international interest in FATCA’ —‘is absurd on its face. If there was such a ‘groundswell,’ why would they need another six months to try to push everybody into IGAs? This is just a poor excuse for the fact that there isn’t a groundswell, that on the IGA front they’re behind where they expected to be at the end of 2012. ‘Every additional country we bring on board’—or fail to have brought on board yet—means they have to contemplate trying to enforce FATCA directly, of which Treasury is even more terrified of than the FFIs are. Congressman Bill Posey’s July 1 letter to Secretary Lew knocking the legs out from under promises of ‘reciprocal’ information from the US removed what little credibility this policy had. The Department should heed Mr. Posey’s advice to suspend FATCA’s enforcement and negotiation of further IGAs until this misguided law can be overhauled, or better yet, repealed.
I am beyond my allotment on that 5 ongoing concerns article on Financial News… Can you summarize the ones they listed. thnx
@Victoria just circulated this from Sophie in’t Veld’s office. It was sent to her directly and was tabled today (yesterday?) in the EU Parliament.
It is the Form for Tabling a EU Parliament question
This is the text…
Subject: Revised Timeline for FATCA and IGAs
Recently in a letter to the European Commission, five EU Member States announced their interest in a pilot agreement for multilateral exchange of information on tax matters (EU FATCA) based on the IGAs agreed with the US.[i]
At the same time, the “reciprocity” stipulated in IGAs of exchange of information seems to become problematic for both members of the US Congress and US banks.[ii] Questions were raised about the Treasury’s authority to negotiate directly with foreign governments and to sign IGA’s. There were calls for “a moratorium on FATCA enforcement and negotiations of additional IGAs”.[iii]
On the 12th of July, the US IRS announced a postponement of the enforcement of FATCA by six months because of a.o.”continued uncertainty about whether an IGA will be in effect in a particular jurisdiction hinders the ability of FFIs and withholding agents to complete due diligence and other implementation procedures”.
The list of jurisdictions, treated as having an IGA in effect will include also jurisdictions that have signed but not yet brought into force an IGA and may be removed from this list if they fail to do so within a “reasonable period of time”.[iv] In that case, the FFIs in that jurisdiction will be considered as non-compliant and will be confronted with sanctions.
1. Is the Commission aware of the above mentioned concerns related to FATCA and the IGAs?
2. Is there a “moratorium” on IGAs and does the Commission consider such moratorium as necessary?
3. What would constitute “a reasonable period of time” for bringing IGAs into force? Will the “reasonable period of time” be decided by provisions in the IGAs, or unilaterally by the United States authorities?
4. What is the legal status of IGAs and can the US change or repeal them unilaterally at any given time?
5. Should the IGAs on FATCA constitute a template for EU-wide exchange on information on tax matters, given its flaws regarding proportionality and data protection?
Just Me –
Your allotment? That’s like going cap in hand through OVDI. Do it yourself. Visit http://hidemyass.com/ or some other anonymizer. Free yourself from the paywall. Do not depend on others for this. Sauve qui peut!
Good point. Thanks for the tip. I will.
Maybe not the right thread to post this, but here is one of the first articles that talks about the human aspects and disproportionate penalties in the context of FATCA.
I am traveling in a car, and my android browser doesn’t have the google translate plug in. (need to add it) However, keep an eye on Jack Townsend’s blog, as he is seeking permission to publish the Tax Notes July 15 th article on Personal Impacts of the Offshore Jihad. (no they didn’t use Jihad… )
Here is the Google Translate text:
The case of the SWIFT platform is eloquent: the United States have seen all their requests for information to be accepted by the EU. For its part, the IRS does not hesitate to spy on “conservatives” who criticize his policies.
America does make good use of data from FATCA, the Washington law that requires foreign banks to report the data of any person subject to the IRS? The precedents are not encouraging, starting with the case of data transmitted through SWIFT. In August 2010, an agreement was reached between the EU and U.S. authorities to regulate the transmission of financial data on international transfers via SWIFT, a Belgium-based platform that plays the role of “Internet Banking”.
This agreement, called the Terrorist Finance Tracking Program, or TFTP Agreement provides for inspection by the Europol Joint Supervisory Body (JSB), whose mission is to ensure that individual rights are not violated.
And they are, if we may believe the president of Europol JSB, Isabel Cruz, already in March 2011, fell Europol has accepted all requests data that were made to him by the Americans. All. The Americans argue that explanations are given orally, which makes any supervision impossible. However, the TFTP has been reached to end the uncontrolled collection of data by the United States as part of SWIFT.
Observations published by Europol represent only the tip of the iceberg, as the report JSB is classified “SECRET UE”. And even this report does not say everything because, according to a press release of March 2012, following a second inspection, Europol does not know the amount of data actually transferred. “No information was released by the United States about the data transferred.”
A third inspection was apparently shown some progress but, in view of the foregoing, it would take more to reassure.
“Relentless” from the IRS
The concern is heightened further by the recent scandal that led to the resignation of the head of the IRS, the IRS, Steven Miller for putting under surveillance “conservative groups.” Republicans felt that the IRS was used by the U.S. administration to take its political opponents.
In this context, the suspicion that the TFTP can be used for other purposes such as taxation, again more easily surface and FATCA reflects the willingness of the IRS to know everything, including when no tax evasion n has occurred.
The citizen who failed in good faith to complete a FBAR (Foreign Bank Account Report) sheet is liable to a fine of 10,000 dollars. If the omission is considered suspect is up to half the account or at least $ 100 000. The “special agents” of the IRS have the right to shoot a taxpayer deemed unsafe and, where applicable, his dog or “violent any other animal.”
In a lecture delivered on May 9 before the American Bar Association Section of Taxation, Nina Olson, speaking in his capacity as National Taxpayer Advocate (NTA) has delivered strong words: “I think the IRS is at a crossroads, and for a variety of reasons, we are witnessing the emergence of a new IRS radically different from what we have seen there are only one or two decades. ”
Nina Olson gives examples of “hard” to the IRS on small taxpayers and does not hesitate to say that “the taxpayer’s rights are human rights.” It clearly indicates that, in this area too, there is a “drift of the tax administration in the United States.”
This argues for a very cautious approach to overseas data, the consequences for the individuals concerned may be out of all proportion to what is customary in a democratic country.
Safe travel, Just Me. Thanks for the heads up on Jack’s blog. I look forward to reading that article.
The question is when are they going to listen to Nina and provide a straightforward path to compliance. I was hoping they would do it in a reasonable timeframe and I could benefit from it. But with my tax SOLs coming up, I won’t sign up with anything they come up with. Too late for me. I don’t trust them and don’t want to step into hell. Hopefully I won’t have any issues with past FBARs.
Thanks for that alert Just Me. Can’t wait to read the whole thing. Looks like great contextual material for those still trying to reach the minds and hearts of Senators and Congresscritters.
For those awaiting access to the Sapirie article, here is the link to Jack Townsend’s blog where he provides an excerpt at http://federaltaxcrimes.blogspot.ca/2013/07/article-on-real-people-consequences-of.html
Marie Sapirie, The Personal Impact of Offshore Enforcement, 140 Tax Notes 187 (July 15, 2013)
Here’s the direct link to the Sapirie article: http://www.taxanalysts.com/www/features.nsf/Articles/8E6965DFA3441ADF85257BAA0048E526?OpenDocument mentioned by Just Me in comments above.
Here were the 5 FATCA concerns…
1) Intergovernmental agreements
In order to soften the blow of Fatca, the IRS has put in place a number of bilateral agreements with other countries. It is to these IGAs that the IRS attributed the continued delay.
Robert B. Stack, Treasury deputy assistant secretary for international tax affairs, said in a statement: “Given the groundswell of international interest in Fatca, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins. The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”
The US Treasury Department is in conversation with more than 80 jurisdictions about IGAs, and only nine have so far signed IGAs with the IRS, and the final details of some of the IGAs remain unclear.
2) Delays cause damage
When the rules were signed into law by President Barack Obama in 2010, the original Fatca start date was January 2013. In July 2011, this date was delayed for a year. However, last week the IRS issued another notice to say Fatca had been postponed for a further six months, with withholding obligations delayed to July 2014.
Jon Asprey, head of the compliance consulting team at Trillium Software, a data technology provider, said: “I think the delays to some degree introduce uncertainty, which is not good for some financial firms. But it does give them more time to prepare themselves.”
Jim Muir, director of data reconciliations provider AutoRek, said: “It seems to me that the failure to understand the complexity of the changes that FATCA demands may be backfiring and will mean that the industry has less faith in meeting regulatory deadlines in the future.”
3) Fatca goes global
Participants are concerned about the increasingly global nature of Fatca. The US Treasury has designed two options for countries to develop IGAs, which detail how each country and its entities will have to comply with Fatca. Model 1 of the IGAs has a clause that gives the opportunity for partnering countries to launch their own version of Fatca, and to demand in the future the exchange of tax information with the US on their own citizens. Keith Hale, executive vice-president, client and business development at technology firm Multifonds, said last year that he feared the US Fatca was the “thin end of the wedge”. He said: “I hate to be proven right, but this is global.”
Asprey said he had already seen evidence of firms getting to grips with the extended versions of Fatca. He said: “I’m seeing a change in tide to try and future proof the work that [firms] are doing for Fatca. That means they anticipate further information exchange agreements to come out from other authorities.”
Model 2 does not carry this reciprocal clause.
4) Delay to registration
The IRS had anticipated that an online registration portal would go live today. But on Friday morning US time, the IRS said it would be opened on August 19, postponing firms that had spent time and money preparing for the rules.
Once a financial institution has registered as compliant or is deemed compliant – an entity that is assumed to be low risk for tax evasion purposes, such as a pension scheme – the IRS will issue a global intermediary identification number, used to identify a firm and its status. The first set of registered financial institutions was set to be released in December – but this has been delayed to June 2014.
5 ) No Fatca – no business?
Concerns remain that fund managers and banks might refuse to accept US clients. One market participant said he has heard from dealers that they “will not want to work with [firms that] are not Fatca-compliant. They are asking them to be registered and ready.”
From wikipedia, http://en.wikipedia.org/wiki/Holocaust_train
“The Holocaust trains were railway transports run by German Nazis and their collaborators to forcibly deport interned Jews and other victims of the Holocaust to the German Nazi concentration and extermination camps.
Modern historians suggested that without the mass transportation of the railways, the scale of the Final Solution would not have been possible.”
The US government’s “final solution” to offshore tax evasion would not have been allowed to reach the stage it has without its collaborators, the railway builders, and as long as there remains the impetus to do so, the FATCA train continues to chug along…delays and all.
Well worth reading Victoria’s cogent and informed analyses over at the Flophouse, great comments too:
“Monday, July 15, 2013
FATCA: A Project Audit ”
I greatly admire her ability to analyze FATCA from this perspective.
She writes logically, rationally, dispassionately and analytically in this critique of the method and madness of the manner in which FATCA is being constructed – doomed to be a tottering mish mash mess with catastrophic consequences.
Also well worth reading is her other post http://thefranco-americanflophouse.blogspot.ca/2013/07/some-great-fatcacbt-links.html with FATCA links (some of which appear on IBS in various places)
with an update on the latest from Sophie in’t Veld of the EU, on this matter.
Thank you, badger. I really appreciate your words and your putting up the links.
That post, in fact, was directly inspired by a conversation here at Brock. Just one example (and there are many others) of the incredible synergy we create here.
Bises from Versailles where it is nearly 30 degrees and it is too hot to move!
Hat tip to @Tim for this link…
Concerns remain as US Fatca delay gives banks breathing space
@Victoria, all the words heartfelt. Many a day (and often late at night) I’ve found solace and welcome distraction by reading your thoughts and words on the Flophouse blog – and always enjoy it no matter what the topic – whether gardens or emigration.
So glad to see the updates on the work of Sophie in’t Veld. I showed videos of her at the EU to a junior family member as an inspiration – to show a strong voice in action – committed to real citizen participation and democracy.
Thank you for all your work and creations.
Gotta love that quote:
“…Pamina Dexter, compliance officer at Svenska Handelsbanken, told delegates Fatca is a “huge opportunity”. She said: “What Fatca offers is a chance to really know who our customers actually are – and what their assets and holdings are – and start to use that data more cleverly to sell things to them.”……..
And no doubt to suction off our assets via increased banking and investment fees – in addition to the taxes raised from us and all our fellows outside the US in order for our non-US governments to pay for defending and implementing the FATCA IGAs into perpetuity.
Canadians should be asking how much the Harper government will be spending on remaking the laws and saddling the Canada Revenue Agency with tracking and reporting all of the date FATCA requires on the > 1 million of those Canadian citizens and residents deemed to be ‘US taxable persons’ by the US. And how they’ll keep up with whatever changes and demands will continue to result as the US tweaks it without consultation or consent by Canada and other countries. That is in addition to violating our Charter and constitutional rights, invading the privacy and data integrity of Canadian citizens and residents, and sucking out Canadian made and held assets.
Strange that anti-tax groups here and conservative think tanks like the Fraser Institute haven’t said anything in public that I can find. The Fraser Institute has strong ties to the Harper government and its allies and vice versa.http://isaacbrocksociety.ca/2013/01/12/jamie-golombek-of-the-financial-post-continues-to-carry-obamas-water/comment-page-2/#comment-144149
There is also nothing on the C.D. Howe Institute’s website either http://en.wikipedia.org/wiki/C._D._Howe_Institute “…The institute derives the majority of its funding from individual and corporate members, who are given the opportunity to attend public policy roundtables and conferences featuring prominent Canadian and International policymakers, business leaders and public servants. Major areas of policy research include fiscal and tax policy, monetary policy, social policy, governance and public institutions, trade policy, and economic growth and innovation. The institute also commissions a number of policy programs, including the Monetary Policy Council, Fiscal and Tax Competitiveness Program, Financial Services Research Initiative, and Pension Policy Council and Competition Policy Council.…”
Your point is well taken….Now that FATCA is a legislative reality in the UK, a guy on Linkedin just asked this…
I am concerned that my brokerage firm and building society may assume I’m still a ‘U.S. Person’ in spite of having renounced and promptly received a CLN…who’s to say that the U.S. might decided that even former citizens are still deemed U.S. persons in some situations….
I’m assuming that after I file 8854 next spring (2014) and my final tax return (dual status, etc.) that I’ll have to file a W8-Ben to nullify the W9 form I previously filed…but am laying low with all this until I get my annual statement for 2013…subsequently, I’d imagine that they’d have me (after seeing a copy of my CLN) continue much as before but with U.S.-source tax withheld on dividends, etc. No worries 🙂
@Just Me, re; “…Seems bizarre if UK FFIs will have to implement FATCA before everyone else…” from the Linked In comment you mention above.
When I read that, I was hoping that this will be an object lesson for all the other countries the US says it is in FATCA IGA talks with. FATCA is a moving target, and the US intends to do whatever it can force on others and get away with.
How will UK politicians explain away what they have just enacted, but without any control over what the US does with FATCA without UK consent?
I hope that Flaherty and Harper are watching, because this demonstrates that this is NOT an agreement between equals, and it is NOT in the best interests of any other country – it is all about what the US wants and can force on others – no matter what the cost and impact on real people’s lives and families, their assets, wellbeing, civil and human rights, and domestic laws.
Hope that person’s questions are echoed across the internet and makes it into the mainstream media.
This may already have been posted but it’s seems appropriate to add it here.
This is the British Banking Association’s letter they sent back in February with all sorts of questions. I wonder if they ever got any answers?
Yes, Victoria, they were answered, in a way, the UK FATCA IGA just became the law of the land in the UK effective the 17th of July…
Read more here…
@monalisa1776: I’m assuming that after I file 8854 next spring (2014) and my final tax return (dual status, etc.) that I’ll have to file a W8-Ben to nullify the W9 form I previously filed…
If you have filed a W9 with your broker in the past, you need to file a ‘curative’ W-8BEN with them right away. You should not wait, nor do you have to. You stopped being a US person on the day you renounced, and there is no reason to still put up with being treated as one.
(Arguably you could have filed W-8BEN the day after you renounced at the consulate, but not having an actual CLN might have been a hiccup at that point.)
Are Flaherty and Harper watching?
Alert from Finance Canada:
Canada Focused on Jobs and Growth at G-20 Meeting in Moscow
The Honourable Jim Flaherty, Minister of Finance, will urge his Group of Twenty (G-20) colleagues to be ambitious in their reform efforts as they work to develop the St. Petersburg Action Plan to be endorsed by Leaders in September. In this respect, Minister Flaherty will encourage countries to undertake reforms that boost jobs and growth while ensuring fiscal sustainability over the medium term.
“The key task for all countries is to boost jobs and growth while committing to credible plans to achieve fiscal sustainability over the medium term,” said Minister Flaherty.
“Canada is not immune to ongoing weakness from beyond our borders. A fragile global economy and potential external economic threats add an extra layer of challenges.”
In light of these challenges, the Government of Canada remains focused on the economy and implementing Economic Action Plan 2013 to create jobs, while keeping taxes low and returning to balanced budgets in 2015.
The Government has also taken aggressive action to crack down on international tax evasion and tax avoidance. Minister Flaherty will encourage further leadership by the G-20 in the development of a cohesive international approach to address these issues.
As co-chair with India of the Working Group on the G-20 Framework for Strong, Sustainable and Balanced Growth, Canada continues to play an important leadership role in preparing the action plan for endorsement by G-20 Leaders at the St. Petersburg Summit in September.