From Bloomberg this yesterday
Norway Gets U.S. Help Chasing Citizens Dodging Income Tax Law
The U.S. Foreign Account Tax Compliance Act, known as FATCA, may lead to dozens of agreements between countries [IGAs] to exchange information on bank accounts. The law requires foreign banks to turn over information to the International Revenue Service (IRS) about their U.S.-owned accounts or potentially face withholding taxes.
Norway is catching more tax dodgers abroad with fresh help from the U.S. legal system.
Federal courts in six states have allowed the Internal Revenue Service to issue [John Doe] summonses to U.S. banks at the request of the Norwegian government, and the banks may now have to give up information on people who used some kinds of credit and debit cards, Bloomberg BNA reported, citing the Justice Department.
This story has been previously reported at Forbes by Kim Novak, and Jack Townsend also noted it. This is the latest development, in my opinion, of the domestic FATCA, or DATCA as I call it. I have updated the history at this link.
There is also the step child of FATCA (Corp beneficial ownership) that was noted in this story:
Ranch House Near Reno is a Thriving Tax Haven, and It’s Not Alone
Notice this legislation introduced by Uncle Carl Levin It too is part and parcel of the DATCA reciprocity that Robert Stack has promised the EU. Wonder what the Senators from Nevada, Delaware and Wyoming think of this blow back onto their states?
If we want to stop inappropriate corporate secrecy offshore, we need to stop it here at home as well!
“The Levin-Grassley bill would require the States to add a single question to their existing incorporation forms requesting the names of the natural persons — the beneficial owners – behind the corporations being formed. States would not be required to verify the information, but penalties would apply to persons who submitted false information” – See more at: http://www.levin.senate.gov/newsroom/press/release/levin-grassley-introduce-bill-to-combat-us-corporations-with-hidden-owners#sthash.84rMskVL.dpuf
Won’t this in effect defeat the purpose of why people form corporations in the first place, the limited liability aspect of doing so? You may as well abolish corporations altogether!
No doubt the other countries have gotten a wind of it and that is what they are getting behind the closed doors. It is something that Barry can deliver—-knocking down the doors of a few banks with summons.
And these John Doe summons are used in Scandinavia without a whiff of thought. Sweden’s skatteverket has a program every 2nd year to do a John Doe summons at the big employers to get all of the invoices which have been sent in by the contractor firms of foreign citizens. The invoice amounts are used to compare to what is reported by the individual and an audit is performed. For those where the differences are great, their credit card transactions are acquired and their US tax declaration is acquired according to the tax treaty. No doubt, for sweden, what would be requested would be to get the monthly bank deposits and bank amounts too.
I wonder if this is good news in a perverse way, because it will completely energize the US banking lobby. One country, Norway, has forced the US hand and the US is now trying to deliver on reciprocity. They are using Norway as an example to entice all the IGA reluctant debutantes to the ball.
But think about it — one country! What happens when 150 IGA-countries start flooding the US court system, with the help and assistance of Treasury/IRS, and every bank in the US is deluged with court orders seeking financial data on foreign nationals with accounts? Pandemonium, in my opinion.
The US bank lobby is already aware of this — now they have a specific action to use in their campaign to “undo” reciprocity. Congresspeople being mostly unthinking fatheads, it won’t take long before there is a groundswell of support for a bill (Rand Paul?) that would make reciprocity illegal — and that I think might be the beginning of the end of FATCA. US hypocrisy — always lurking under the surface — will be out of the closet in all its glory.
Joke of the day…
President Obama walks into the Bank of America to cash a check.
As he approaches the cashier he says, “Good morning Ma’am, could you please cash this check for me?”
Cashier:
“It would be my pleasure sir. Could you please show me your ID?”
Obama:
“Truthfully, I did not bring my ID with me as I didn’t think there was any need to.
I am President Barack Obama, the President of the United States of AMERICA !!!!”
Cashier:
“Yes sir, I know who you are, but with all the regulations and monitoring of the banks because of impostors, forgers, money launders, tax cheats and requirements of KYC, AML, FATCA, DATCA, Frank Dodd, 1099 reporting, etc., I must insist on seeing ID.”
Obama:
Just ask anyone here at the bank who I am and they will tell you. Everybody knows who I am.”
Cashier:
“I am sorry Mr. President but these are the bank rules and I must follow them.”
Obama:
“I am urging you, please, to cash this check.”
Cashier:
“Look Mr. President, here is an example of what we can do. One day, Tiger Woods came int othe bank without ID. To prove he was Tiger Woods he pulled out his putter and made a beautiful shot across the bank into a cup. With that shot we knew him to be Tiger Woods and cashed his check.
Another time, Andre Agassi came in without ID. He pulled out his tennis racquet and made a fabulous shot whereas the tennis ball landed in my cup. With that shot we cashed his check.
So, Mr. President, what can you do to prove that it is you, and only you, as the President of the United States ?”
Obama:
Obama stands there thinking, and thinking, and finally says, “Honestly, my mind is a total blank…there is nothing that comes to my mind. I can’t think of a single thing. I have absolutely no idea what to do and I don’t have a clue.
Cashier:
“Will that be large or small bills, Mr. President?
USA has been overthrown by Norway! 4 million people. All the Americans got thrown out of Norway back in the late 80’s. The only ones left are the ones that assimilated. Trust me, I’ve been there. Now they are getting the information they need out of the suckers in Wash DC.
From the Reno article:
“In the United States, most states do not require companies to list who actually owns them—who actually controls them,” said Robert Palmer of the anti-corruption group Global Witness in London. “There’s been research done by academics where they’ve gone round and they’ve tried to set up anonymous shell companies all around the world. And they found that the easiest place to do it was the United States.”
So there’s the solution to our FATCA / FBAR problems – we should keep our money in Nevada or Delaware.
@Shunrata
or anywhere else in the United States and buy only U.S. mutual funds.
Interestingly that would end all the difficult reporting requirements. That said, not a good solution for long term U.S. citizens abroad.
@USCitizenAbroad
Tongue firmly in cheek of course.
It just shows up the absurdity of the “rich overseas tax cheats” stereotype.
This is a very perceptive and important post.
I agree completely with Arrow’s comment.
Yup, bring this reciprocity stuff on!
The end game will of course be:
The U.S. will not provide reciprocity and will still try to impose FATCA on the world. Then the world will have to choose between two options:
Option 1: Allow the U.S. to impose an Orwellian/Totalitarian dictatorship on the world;
Option 2: Unite to create an alternative financial system that will make the U.S. less relevant or possibly irrelevant.
I’m betting on the second.
Homelanders – who live in the land of the Invisible Fence – reading this would probably laugh, but as Goethe said:
“None are more hopelessly enslaved than those who believe they are free.”
Moody’s has picked up on the Norway-US “John Doe” incident and says:
“Canadians know that their proximity to the US presents both risk and opportunity. One risk that has always been hard to quantify is the risk that the IRS and CRA will cooperate to enforce each others’ tax laws with respect to assets and information on both sides of the border. Recently, the likelihood of this cooperation increased significantly. For the first time, the US government has used a powerful device in support of a treaty-partner government to obtain financial data. At the request of the Norwegian taxing authority, the IRS (and Department of Justice) applied to US federal district court (in multiple jurisdictions) for leave to file a “John Doe” summons….”
“Of course, no one is surprised that the IRS wants to serve summonses on American banks that have issued payment cards to parties that the IRS has reason to believe are skirting the tax laws. But here the tax laws being skirted are the laws of . . . Norway. And the failures to report, file and/or pay are all breaches of Norwegian law. And the IRS only sought leave to file these summonses because the Norwegian Tax Administration requested assistance in identifying [Norwegian] tax scofflaws making use of these cards to avoid their tax obligations.
“The US Department of Justice acknowledges that this is the first time that “John Doe” summonses have been utilized to enforce the tax laws of a foreign sovereign. However, the Department of Justice argues that since the US – Norway Tax Treaty (Convention) requires mutual assistance in collection of revenue as though such revenue were payable under the assisting country’s laws, and since treaties are recognized as having the authority of federal law, the IRS is justified (if not obligated) in using the summons mechanism in its cooperation with Norwegian tax authorities.”
Language similar to the language of the US-Norway tax convention can be found in many of the Tax Treaties to which the US is a party. Practitioners expect that international cooperation in revenue enforcement will continue to expand. Taxpayers should realize the potential for the taxing authority of one country to assist the taxing authority of other countries in identifying parties and/or assets subject to enforcement. Individuals and businesses have long been crossing borders to seek economic opportunity; governments are now doing the same.”
http://www.moodystax.com/trick-or-treaty-are-canadians-next-as-irs-takes-historic-first-step/
@ IRSCompliantForever
The trouble is, of course, is that the USA is playing on its unique and “exceptional” CBT baseball diamond while ALL other countries are playing on RBT football fields (or in Canada’s case its RBT hockey rink). Or to use another metaphor, CBT is the rotten apple in a barrel of RBT oranges. CBT doesn’t fit so we must find a way to make it quit.
special procedures for John Doe Summons
http://www.irs.gov/irm/part25/irm_25-005-007.html
ACFS
http://www.acfcs.org/us-court-approves-first-us-internal-revenue-service-john-doe-summons-to-help-track-foreign-nations-tax-evaders/
San Antonio summons
http://www.justice.gov/tax//2013/WD_Texas_San_Antonio_Memo_in_Support.pdf
Pennsylvania
http://www.justice.gov/tax//2013/WD_Pa_Filed_Brief.pdf
Minnesota
http://www.justice.gov/tax//2013/D_Minn_Notice_of_Filing.pdf
@MarkTwain…
Thanks for those links.
Our Swiss branch now requires people opening accounts to sign that they do not have any Norwegian connection, in addition to the W-8 or W-8BEN to declare non-US status. Misery loves company?