#FATCA: will Europe pay the price for one-sided U.S. financial information demands? http://t.co/Dc2BL0z34U via @New_Europe
— U.S. Citizen Abroad (@USCitizenAbroad) August 15, 2013
A new post from Jim Jatras
It seems that “automatic exchange of information” (AEOI) is all the fashion at the European Commission as a means to combat “revenue losses incurred due to tax fraudsters and evaders.” To that end, a recently proposed Council Directive would base an AEOI “pilot action” on model intergovernmental agreements (IGAs) drafted pursuant to a “joint statement” last year by the U.S. Treasury Department and five EU governments for “reciprocal” implementation of the U.S. “Foreign Account Tax Compliance Act” (FATCA).
As an American, I cannot tell Europeans they should not base their tax policy on AEOI or the FATCA model. But if the Commission or EU Member States believe that the U.S. will actually provide “reciprocity” for the kind of information they are committing to deliver to Washington, they should reconsider their assumptions.
Under the FATCA IGAs, European governments commit to require their domestic financial institutions to report the assets of all “U.S. Persons,” first to that government’s own tax service, and then to transfer it to the U.S. Internal Revenue Service (IRS). For example, under a law recently approved by the parliament of the United Kingdom (the first country to sign an IGA), HM Revenue & Customs commits explicitly to impose the American FATCA law on British institutions. The costs of regulatory implementation by HMRC would fall on British taxpayers. In turn, UK financial institutions (and their customers) would bear hundreds of millions of pounds in costs for collecting the information for transfer to the IRS. The direct revenue benefit to the Exchequer? Zero. The same will take place in each non-U.S. “FATCA partner” country, as the 2012 “joint statement” euphemistically calls them. (Worldwide, estimated FATCA compliance costs run to $1 to 2 trillion in order to “recover” revenues of less than $1 billion per year – enough to fund the U.S. federal government for about two hours.)
What is the U.S. obligated to provide in return? Nothing, as it happens. The IGAs, which are nowhere authorized or even mentioned in FATCA, have no clear status in American law. They are not simple treaty-based “interpretive” agreements, nor are they treaty amendments submitted to the U.S. Senate for advice or consent, or to the full Congress for enactment in American domestic law. In essence, this means the IGA has the force of law for the non-U.S. “partner” but not for the U.S. I have first-hand knowledge of at least one government that specifically told Treasury they would consider an IGA only if it took the form of a treaty protocol, with Senate approval, so they could be sure it would bind the U.S. as well. Treasury flatly refused.
You can read the complete article here.
yes they will, with bells on. Their position is that USA has sovereign taxing rules that have long been accepted in treaties. Their own sovereignty and that of their citizens is irrelevant.
Dripping codependents.
http://ec.europa.eu/news/economy/130614_en.htm
There’s those two words again. – Fair share
Does anyone even know what the hell ‘fair share’ even means? (sigh)
Here is a putrid set of positions by the OECD, meeting coming up next month
http://www.oecd.org/ctp/BEPSActionPlan.pdf
Action Plan on base Erosion and Profit shifting
P9: “Taxation is at the core of countries’ sovereignty, but the interaction of domestic tax rules in some cases leads to gaps and frictions”
P13: “Fundamental changes are needed to effectively prevent double non-taxation, as well as cases of no or low taxation associated with practices that artificially segregate taxable income from the activities that generate it”
“Prevent treaty abuse Develop model treaty provisions and recommendations regarding the design of domestic rules to prevent the granting of treaty benefits in inappropriate circumstances. Work will also be done to clarify that tax treaties are not intended to be used to generate double NON-taxation”
P22: “Require taxpayers to disclose their aggressive tax planning arrangements Develop recommendations regarding the design of mandatory disclosure rules for aggressive or abusive transactions, arrangements, or structures, taking into consideration the administrative costs for tax administrations and businesses and drawing on experiences of the increasing number of countries that have such rules”
P25 “C. Methodology The BEPS project marks a turning point in the history of international co-operation on taxation”
P26: (BULLSHIT) “(iii) Consulting with business and civil society Consultation with non-governmental stakeholders is also key. Business and civil society representatives will be invited to comment on the different proposals developed in the course of the work. The OECD’s core relationship with civil society is through the Business and Industry Advisory Committee (BIAC) and the Trade Union Advisory Committee (TUAC) to the OECD Non- governmental organisations, think tanks, and academia will also be consulted The OECD’s work on the different items of the Action Plan will continue to include a transparent and inclusive consultation process, and a high-level policy dialogue with all interested parties will be organised on an annual basis”
Summary: 20 putrid countries agreeing upon “sovereign” methods to make sure that no money is missed anyplace. No discussion of what might be appropriate for any of the serfs. Fully assumed that all of the serfs believe that everyone should be “paying their fair share”:
So, every wanker country is pushing for this crap. And more alarmingly, if you use search engine upon that report, you will get only positive reactions in the top hits, with no dissension. Hmm, I wonder if there might be armies of 29 yr old computer hacks working around the world to make that happen. They are all dying for these information exchanges and will do anything to sign up.
The obvious question here is “why”. Why are these nations going along with this? Now perhaps I understand in the case of the UK. Seems to me that the last time the UK stood up to the US was in 1982 when Thatcher made clear that–Reagan’s too cozy relationship with the junta notwithstanding–she was going to defend British interests with or without Reagan’s blessing. Since then the UK has a history of bending over whenever the US asks.
But Switzerland? Why would Switzerland–with a long history of maintaining its neutrality in the face of bullies–go along with something like this? Seems to me that if Switzerland loses its reputation for secrecy and neutrality, it doesn’t have much at the international level. Asking Switzerland to give up its neutrality strikes me as a bit like asking Saudi Arabia to give up producing oil. Why would anyone in the international community deal with Switzerland now given that if you give any information to the Swiss, you are giving it to Washington.
The usual–and usually true–observation that the “big guys” will do what they want without regard for the concerns of the “little guy” doesn’t seem to hold here. FATCA doesn’t seem to benefit anyone–big guys or little guys–in the countries that are signing these IGA’s.
The only thing I can think of is that it seems that most of the countries signing these IGA’s so far (Japan and Mexico excepted) are in Europe. Perhaps Europe’s financial problems are even more serious than those of the US and make it easy for the US to bully Europe financially.
@mjh49783
‘Fair share’ appears to be defined as what I am not paying just after I receive a tax increase. The people generally saying I haven’t paid my fair share conveniently forget the tax increases they already got. Take a look a Bernie Sanders submission for the tax overhaul where the guy thinks the top rate for dividends in 20% rather the actual 23.8% it is.
The game works like this. Select some small group of people with money that you think nobody likes. Tax them in a way that either captures a bunch more people or will capture them in the future via inflation.
AMT is about making 155 rich people pay their fair share for example. There is very little chance then that you pay AMT or even know somebody who does. Mmmmm.
The US government is unable to exchange information simply because it does not have it!
Foreign nationals opening US bank accounts can avoid reporting of their interest to the IRS on a 1099 by filing form W-8. Check out the instructions for this form on the IRS website. The banks do not provide info to the IRS on such accounts.
Therefore the IRS has no info to exchange. Will the government require all banks to provide info on foreigner accounts to foreign governments? Will pigs have wings?
@GEK “The banks do not provide info to the IRS on such accounts.” So if someone really WERE a US tax cheat, wouldn’t the smarter strategy be to open an account in the US while claiming to be a non-US person by filing Form W-8?
“Fair Share” That term always bugs me when it is brought up by persons living in the U.S. I have no problem paying my fair share where I live but, what’s the “fair share” of something you don’t use at all. Nobody is bringing up with the U.S. citizenship based taxation what is the fair share of something you never use? There’s nothing tangible you will ever get for it.
(P26) just shock. There’s been no consulting that I have heard of. Has anyone asked those forced to renounce their U.S. citizenship exactly why this is happening. I mean other than demonizing them? Stakeholders? Aren’t they the ones who have more at “stake” double non taxation. lol…unlikely in high tax countries. ALL this for the few places someone might move to and not be taxed on this planet?
“Fair Share” for the priveldge of keeping the US passport means (i) if you are a dual US/Austrailian citizen living in Australia my friend pays after tax credits about USD 3K for his ‘fair share’, if you are making the same good money in Hong Kong my other friend pays the USA about 150K USD for his ‘fair share’. ‘Fair share’ is a function of how much you pay your local government which after tax credits determines how much you pay the USA. The basic moral of the story is that under the US tax system you either pay the local government of you pay the USA but you don’t get to keep the money you lawfully earned. Of course this is a gross oversimplification because the earned income credit does not apply to investment income, still have to pay for Obamacare and get no services, etc etc. but you get the picture.
I don’t mind my fair share here in Canada where I live and use services and have used them extensively when my son was so sick. I gladly pay what is due to Canada. I don’t understand “fair share” in a country I do not live in. I use zero services there and if I use embassy services those are fee based so I pay for those. In 33 years I’ve used the U.S. embassy once and that was because I was told I had to get a freaking passport. Otherwise, I’d never have gone there to use the “services” I’m being hounded over now.
I cannot fathom what Europe in most cases is getting out of all of this? They are NOT going to get reciprocity. When you break down what the U.S. is doing TO those countries and asking of them, then look at what those countries are getting for this enormous cost to them…this entire thing makes zero sense even to a five year old it would not make sense.
ATTENTION Tweeters
With Just Me gone walkabout in the woods the #FATCA is getting flooded with Fatca-opportunists hoping to peddle their expertise in compliance. This would be a great article to tweet with one of those tweety links. … hint, hint … 😉
http://twitter.com/search?q=%23fatca
My feelings on “fair share” and taxes. (The reason it sounds like I’m talking to someone is because it what posted as a reply to a comment on HuffPost .)
“Yes, we in Canada do pay more tax than you do in the United States, and health care indeed is one of many things paid for through my tax dollars. And, yes, taxes in Canada are higher than in the US. And besides income tax, we have a 5% goods and services tax to the federal government (low income people can apply for a rebate to help offset that). But the goods and services tax means that unlike the US, where close to half pay no federal tax, all Canadians pay federal tax. If your kid buys a comic book, your kid pays federal tax on it. If your mom dies, you pay federal tax on her funeral.
Do I have a problem with paying tax? No. I can see what we get for our tax dollar – and health care is one of those things. And although America has private health insurance, even in America there are some things that only a government can provide by pooling people’s “club dues” together – eg roads, military, etc.
I’ve read Americans commenting “nobody likes to pay tax.” It sounds rather silly to a Canadian. Do Americans also say “nobody likes to pay for groceries?””
@pacifica, that was an excellent comment. People who live in the U.S. don’t think of taxes the same way we do. I do NOT mind paying my taxes here in Canada. Oh okay my property taxes in the city I live in are off the hook high BUT, I live in a safe, pleasant, community that many people want to move to! I can see what I get. Therefore, even that doesn’t bother me. It’s worth it. It’s a quality of life issue.
But what quality is it they think we are getting by being taxed by the U.S. where we don’t live? If you pin them down on it they cannot answer you! They just huff and puff and say “U.S.A.!!” which of course isn’t an answer. Oddly, if another country were doing this to them, within their borders they quickly would fully understand and oppose.
@AtticusinCanada,
I think you just wrote another ‘comment of the day, clear and to the point.
@pacifica777
Yes, we certainly pay more taxes here, but we also get back more of what we’re compelled to pay for.
Also, I never understood why nearly half of the homelanders can complain so much about paying federal taxes when they don’t pay anything, and even get refunds in some instances. There’s quite a few free riders in that wagon, and not a lot of people pulling. Maybe THEY should pay their ‘fair share’!
@AtticusinCanada
“People who live in the U.S. don’t think of taxes the same way we do. I do NOT mind paying my taxes here in Canada.”
Absolutely! All they bleet about is ‘those goddamn taxes’ as though it’s almost their god given right not to pay or something! No taxation without representation! etc….
The sad irony of it all is that they would dare to tax me for not living over there and using their infrastructure and crap, and then deny me effective representation by diluting my voice with the hordes of homelanders!
I don’t have a problem with taxes. I pay them in Canada where I live, and I get some of it back for being poor. What I do have a problem with is freeloaders that expect me to pay for their free share, and all I get out of it is the right to have this stupid passport that I still have to pay for out of my own pocket anyway!
Grrrrr……
@WhiteKat thank you again. You’re so encouraging!
@mjh49783, Exactly! Any law regarding U.S. taxes should be going after people who live there! Instead of doing that they have devised a way to siphon penalty money out of U.S. persons and our families all over the world.
When will those who actually live there be required to pony up their “fair share” for the services they actually use.
@mj
It is particularly irking to hear complaints about ‘paying one’s fair share’ when you live in a high tax country such as Canada, especially when you are an average Joe with no choice but to pay your ‘fair share’.
I know of so many Canadians who game the system because they can, and they appear to have no guilt doing so. They are not average Joe’s though. Some are business owners, trading services for merchandise, or taking cash under the table, or retired at 50 now flipping houses for fun and somehow managing to make their household income look low enough so that their college aged kids qualify for OSAP grants. Yet my kid won’t because our family gave up yearly vacations in favour of putting some money into RESPS invested in Canaian mutual funds which have been a losing investment even before we heard of PFICS.
Doh! I should have looked more closely. IBS did tweet this article already. Thanks to whoever! This and the occupy.com article are so on the mark and need to leak into the main stream somehow. I’m waiting to see what the reporter at Global puts out and what kind of reaction will follow. I want to believe that Canadians will be open minded enough to recognize that the US government is trampling on Canada’s sovereignty big time with those oversized FATCA jackboots.
“I don’t have a problem with taxes. I pay them in Canada where I live, and I get some of it back for being poor. What I do have a problem with is freeloaders that expect me to pay for their free share, and all I get out of it is the right to have this stupid passport that I still have to pay for out of my own pocket anyway!”
AMEN!!!! mjh49783, That’s what has me so damned pissed off too. Why the hell should we (talking about my wife here) pay for other free-loading Americans for their healthcare? Why the hell should WE pay for their roads and other things that they use? We don’t use them. So why the hell should we have to pay FOR THEM???
@AtticusinCanada”
When will those who actually live there be required to pony up their “fair share” for the services they actually use.”
Exactly! Their infrastructure is falling apart, but yet nobody wants to pony up for the cost of maintenance? Well what the hell do these people want? Something for nothing? Must be, I suppose. Perhaps that is why it’s so easy to find commercials for ambulance chasers on TV over there. :^/
@whitekat
Indeed. I’m also pretty irked about the gaming that some of the people do here. I get it that the system isn’t always fair, but while we make just a little too much for my wife to get ODSP, (because it is a sad irony to not be able to afford some medications because you make too much money) there are people here that drive fancy new cars and yet we pay more rent than these jerks do because they get their rent subsidized! Yet I ride the damn bus!
Maybe that’s why the people that are fed up with that sort of crap are flocking west? Why pull the wagon when you can go Galt?
@The_Animal
Oh, if those idiots over there were to try and get me to pony up for that abomination called Obamacare, even though I can’t use it here, (and why would we even want to?) I would’ve just stopped filing, stopped crossing the border, and would’ve made myself stateless as fast as I could, because there was no way in hell I would ever comply with that!
@WhiteKat, excellent point! I too do not like tax dodgers here in Canada. There are TWO nail salons infamous for doing this here in my city. Both have asked friends of mine to pay in cash for services and the price for them will be much lower! Upon hearing this I was really upset! We have problems keeping our system running at times. I have volunteered in schools that need help. We know our health care needs help at times. Why not pay for the valuable services you are using, your children and parents use. In fact I came really close to turning them in because they are so blatant about it. They are not even concerned at all they may be caught. One establishment is right in the middle of a big, busy mall for heavens sakes. To hear those in the U.S. call us “tax cheats” They totally miss the point that we pay where we live and are happy to contribute to keeping our society running as smoothly as possible.
It’s being hounded and being told it’s our “fair share” to pay for things we are never going to use that is the rub here and being called a criminal, lumped in with drug lords all for not living there.
They have acknowledged some problems with FATCA and even said at times they know the issues with Americans abroad but, they do nothing to fix it. Okay, so they are not going to residency based taxation. We all know why. If they did they couldn’t rebuild their infrastructure! lol…but, they COULD if they were being fair and honest at least say that if you have not lived in the U.S. for five years or more then you no longer need to file or pay taxes there. Put some sort of a time cap on it at least.