http://www.treasury.gov/connect/blog/Pages/Myth-vs-FATCA.aspx
Myth vs. FATCA: The Truth About Treasury’s Effort To Combat Offshore Tax Evasion
The Foreign Account Tax Compliance Act (FATCA) is rapidly becoming the global standard in the effort to curtail offshore tax evasion. This month’s G-20 communique marked another important milestone; highlighting the importance of global tax transparency and a renewed commitment to work towards an international standard for the exchange of tax information.
For years, there has been concern about the so-called “tax gap” – the difference between the tax dollars that are owed under the law, and those that are actually collected. Offshore tax evasion is a significant contributor to the tax gap. FATCA establishes a process for foreign financial institutions (FFIs) to report information about U.S. account holders to the IRS.
Treasury developed intergovernmental agreements (IGAs) to implement FATCA effectively. These IGAs will require all of the relevant FFIs in a jurisdiction to report information about offshore U.S. accounts – a reporting obligation that will help the IRS catch tax evaders. Yet despite the clear, positive benefits of FATCA, many continue to make misleading claims about its implementation and impact. Here are the facts on FATCA:
Myth No. 1: Some claim it’s overly costly and burdensome due to complex regulations and difficult to meet reporting requirements.
FACT: Treasury and the IRS have designed our regulations in a way that minimizes administrative burdens and related costs. Specifically, the regulations were intentionally designed to appropriately balance the scope of entities and accounts subject to FATCA with due diligence requirements, while also phasing in the related obligations over several years. For example, the final regulations exempt all preexisting accounts held by individuals with $50,000 or less from review. For similar accounts with less than $1,000,000, an FFI is only required to search the account information that is electronically available. In many cases, FFIs are permitted to rely on information that they already must collect for local anti-money laundering and know-your-customer rules.
Many of these cost-saving simplifications were the result of comments received from affected financial institutions and foreign governments, which helped us to tailor the rules to achieve the policy objectives of the statute without imposing undue burdens or costs.
Myth No. 2: Some claim that U.S. citizens living overseas will become outcasts in the international financial world.
FACT: FATCA withholding applies to the U.S. investments of FFIs whether or not they have U.S. account holders, so turning away known U.S. account holders will not enable an FFI to avoid FATCA. We expect that many, if not most, of the governments implementing FATCA through IGAs will require their financial institutions to identify and report on all non-resident account holders, not just U.S. account holders.
Those governments agree with FATCA’s policy objectives, and want to facilitate the collection of information about the offshore accounts of their own residents. For example, 19 countries have already announced a pilot project to exchange account information about each other’s residents that will be collected by the governments in line with FATCA’s due diligence and reporting procedures. FATCA is quickly becoming the global standard for automatic information exchange and we expect the number of jurisdictions that choose to implement the same reporting procedures for all offshore accounts to continue to grow.
Myth No. 3: Some claim that Americans living abroad will give up their U.S. citizenship because of liabilities and burdens created by FATCA.
FACT: FATCA provisions impose no new obligations on U.S. citizens living abroad. Instead, FATCA’s withholding obligations fall on institutions making payments to FFIs, and the due diligence and reporting requirements fall on the FFIs themselves.
U.S. taxpayers, including U.S. citizens living abroad, are required to comply with U.S. tax laws. Individuals that have used offshore accounts to evade tax obligations may rightly fear that FATCA will identify their illicit activities. Yet a decision to renounce U.S. citizenship would not relieve these individuals of prior U.S. tax obligations, and might well create additional U.S. tax obligations for certain citizens and long-term residents who give up citizenship or residency.
Myth No. 4: Some claim that countries are opposed to FATCA, in part because the legislation could force foreign banks to violate laws in their own countries.
FACT: Treasury’s decision to implement FATCA through IGAs that are respectful of the individual laws and customs of partner jurisdictions has contributed to the significant international interest in participating in FATCA compliance efforts. The two FATCA model IGAs incorporate a two-pronged approach: under the first model, FFIs report to their respective governments who then relay that information to the IRS; or, under the second model, they report directly to the IRS to the extent the account holder consents or such reporting is otherwise legally permitted, supplemented by government-to-government cooperation to facilitate reporting on non-consenting accounts. These model IGAs offer alternative frameworks for information sharing that abides by local laws.
The success of this approach is evidenced by the international response to this legislation. To date, Treasury has signed 9 IGAs and has reached 15 agreements in substance, including with Malta, Bermuda, and the Cayman Islands. We are also engaged with over 70 additional countries and expect to conclude negotiations with several others soon.
In September 2013, G-20 leaders committed to the automatic exchange of information as the new global standard, and endorsed the development of a single model for this exchange, which is expected to be based on the FATCA IGAs.
Myth No. 5: Some claim that FATCA will generate a backlash from foreign governments who view this as an overreach of U.S. law.
FACT: FATCA has received considerable international support because most foreign governments recognize how effective FATCA, and in particular our intergovernmental approach, will be in detecting and combatting tax evaders. G-8 leaders recently acknowledged the central role of tax information exchange, stating in their June 2013 communiqué: “A critical tool in the fight against tax evasion is the exchange of information between jurisdictions,” and urging that “[t]ax authorities across the world should automatically share information to fight the scourge of tax evasion.”
Myth No. 6: Some claim that FATCA will unfairly expose FFIs to heavy penalties before they have the necessary mechanisms in place to comply.
FACT: We recently announced a six-month extension to our withholding and account due diligence requirements because we recognize that FFIs need sufficient time to register for, understand, and implement their due diligence and reporting processes. Those requirements will now start on July 1, 2014. This extension exemplifies our commitment to ensuring that foreign jurisdictions and FFIs have sufficient time to properly prepare so that the law can be implemented effectively.
Myth No. 7: Some claim that FATCA aims to use foreign banks as an extension of the IRS.
FACT: Individuals making this claim have confused reporting responsibilities with actual enforcement. The objective of FATCA is the reporting of foreign financial accounts held by U.S. persons or certain entities with U.S. owners. This law only requires FFIs to share information about financial accounts held by U.S. taxpayers, similar to what is already required of U.S. financial institutions; it does not include an enforcement component for those FFIs.
U.S Expat Tax Advisory System.
@Innocente …
RE: “The FATCAnatics don’t care about the collateral damage.”
Absolutely correct. Not their problem.
http://www.youtube.com/watch?v=mmB37smk3h4
Robert Stack and his federal agents are here to find everyone who has moved to Denmark in order to avoid taxation
Robert Stack the Untouchable: Do what ya gotta do.
Robert Stack the Untouchable.
The Myth.
http://www.crimelibrary.com/gangsters_outlaws/cops_others/ness/1.html
http://www.biography.com/people/robert-stack-248619
US Treasury International Counsel admits that US reciprocity is a MYTH:
……At that same conference, the Treasury’s International Tax Counsel Danielle Rolfes acknowledged that the United States currently does not have legislation in place that would permit the U.S. to comply with reciprocal reporting under FATCA or the OECD’s Common Reporting Standard, but added that the Administration was committed to pursuing such legislation.”
from; ‘Treasury Official Says Penalty Grace Period Unlikely for FATCA’
March 5, 2014
http://www.cadwalader.com/thecabinet/regulatory_updates.php?ID=7327&date_filter=5
RECIPROCITY by the US IS a MYTH!!
What’s MYTH for the US Treasury is good enough for the Canadian government. Reciprocity is not necessary, when the promise of merely working toward it is “thrilling” enough for the Canadian government to sign our sovereignty away over. Does the word SUCKER come to mind?
@bubblebustin,
Are they planning to concoct a claim that they were ‘hoodwinked’ or suckered by the US? That they had no idea that the US could not and would not and never contemplated reciprocity in FATCA’s design and intent? That they entered into the IGA in ‘good faith’?
Which is all a big pile of BS that there is ample documentation to refute.
They are either ‘willfully blind’ or deliberately misrepresenting the situation. Hoping we are blind too.
And are now willful accomplices of the US – they’ll have to go along as it admits that it didn’t intend to and knows that it can’t offer any true reciprocity equivalent to what it demands. The OECD situation also underscores that and makes the FATCA IGA ridiculous. That is why the US is lying and selling the fiction that FATCA is desired by the rest of the globe and not just the product of US extortion. The US will also not do anything internationally to disadvantage Biden’s tax-haven state of Delaware and its hidden incorporations and hidden ownerships. I wouldn’t be surprised if the Florida and Texas bank lawsuits and resistance become an election issue. Then there is also Nevada, Wyoming, etc.
It will be interesting to see how Flaherty and Harper are forced to fast-talk their decision to sign the IGA – as it becomes ever clearer that the US had and has NO intention of cooperating internationally or reciprocally.
They think that they can get all of us and Parliament to buy the superficial fictions they are promulgating, and probably betting that what the CBA, IIAC, and whatever tradeoff the Harper government sold us for will either not register with Canadians, or become clear too late to stop it.
Interesting that Flaherty can live with the stark difference between what he said in his public letter submitted to US media, and his deliberate evasion in Parliament the other day.
His response to MP May was deliberately evasive and disingenuous.
I think Flaherty and Harper and at least some of their caucus are aware of the situation. They chose to proceed anyway.
If the Harper government (and the CBA and IIAC and their ilk) wanted to, they could have opposed FATCA and dedicated resources to the opposition just as they did the Volker rule and other US banking/financial incursions that they disagreed with. They chose not to. Now they are selling misinformation to obscure that.
We were sold down the river.
Look at this too – criticism from within the US;
“US Senate panel cites FATCA ‘loopholes,’ Swiss barriers to US tax enforcement Date: March 5, 2014 By: Brian Kindle
……..” ‘FATCA loopholes are minuscule part of US tax evasion, say experts’
“Some experts on US tax enforcement were skeptical of the PSI concerns over FATCA’s limitations, saying they were minor aspects of a law that introduces sweeping changes in global tax compliance.
“I’m not sure there’s ever been a law passed by Congress that someone didn’t think had loopholes,” said Jeff Neimann, a former Justice Department prosecutor who led the UBS case and is now a partner at Marcus Neiman & Rashbaum, in Fort Lauderdale. “The reality is, FATCA is a very burdensome law.”
Others noted that despite the level of attention offshore tax evasion at Swiss banks had received, the amounts of money at stake were comparatively small, compared to domestic tax evasion.
A former senior official at the IRS, who requested anonymity because he practices before the IRS, noted that small businesses in the US are estimated to evade some $200 billion in taxes per year. This contributed by far the largest portion of the $450 billion US “tax gap” in 2013, or the difference between taxes owed and taxes collected.
“Tax enforcement is always a little bit of smoke and mirrors,” the former official said, noting that IRS lacked the manpower to audit and recommend for prosecution even a fraction of tax evaders.”……..
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More from Mythster Stack:
“Robert Stack, Treasury deputy assistant secretary (international tax affairs) noted the tension between the requirement in FATCA that foreign financial institutions give the United States information regarding account balances and beneficial owners that banks in the U.S. are not required to give the IRS. “It’s a little awkward for the U.S. to have a standard around the world that we don’t ourselves satisfy,” he said.”
“However, Stack noted that the United States has committed in its FATCA intergovernmental agreements to seek supporting legislation that will allow for reciprocity of information exchange……..”……….
http://haydonperryman.com/2015/01/12/the-irs-comments-on-fatca-the-crs-reciprocity-and-the-igas/
Myth No. 2: Some claim that U.S. citizens living overseas will become outcasts in the international financial world.
A news article today is reporting the merger of two banks in Switzerland: Notenstein and La Roche. The article says: “The business activities and the employees of La Roche are to be transferred to Notenstein in the next six months. Excluded are all customers with a direct or indirect connection to the USA.”
http://www.20min.ch/finance/news/story/Notenstein-und-La-Roche-schliessen-sich-zusammen-17722127
Arbeit macht frei!
The “Organisation of the Swiss Abroad” surveyed Swiss banks for conditions that they apply to Swiss abroad who want to maintain a bank account in their home country. Not surprisingly, many banks of the banks surveyed place limitations on services to Swiss who are also US Persons and Swiss in the US:
Banque Cantonale Vaudoise, one of the largest banks in Switzerland, classifies US Persons the same as Iranians, Syrians and North Koreans:
“Restriction opening a new account: US; Iran; Syria, North Korea as well as countries with foreign exchange control”
http://www.aso.ch/files/webcontent/rechtsdienst/Tabelle_WEB_E.pdf
There is a recent trend of more US citizens physically leaving Switzerland than taking up residence in the country. For the same period, the number of non-EU citizens continues to increase although at a diminishing rate. These figures are for US and non-EU citizens with a one-year or longer residence permit and are for the 12 months from July to June:
US Citizens Net Immigration or (Net Emigration)
Jun 15 -402
Jun 14 -261
Jun 13 -145
Jun 12 407
Jun 11 439
Jun 10 507
Jun 09 878
All non-EU citizens Net Immigration
Jun 15 11’405
Jun 14 11’740
Jun 13 13’049
Jun 12 14’588
Jun 11 15’483
Jun 10 17’026
Jun 09 19’113
The net departure of US citizens from Switzerland is likely related to the job and bank account discrimination against US citizens that began in earnest in Switzerland in 2012. A big, sarcastic thanks to Kathryn Keneally, former Asst Attorney General, and Robert Stack, Deputy Asst Treasury Secretary for enabling this.
Figures are spreadsheet 4-30, Letzte 12 Monate (Last 12 Months), table CH-Nati at this link:
https://www.bfm.admin.ch/bfm/de/home/publiservice/statistik/auslaenderstatistik/archiv/2015.html
@Innocente, re;
“Restriction opening a new account: US; Iran; Syria, North Korea as well as countries with foreign exchange control”
The US is willing to smash millions of ordinary eggs for no real net gain.
Robert Stack presented to a Swiss-American Chamber of Commerce audience yesterday. At this link is a picture of him (currently at 1/10), looking old, tired and probably jet-lagged:
http://amcham.ch/
Also at this website is a press release “Business with the USA: Great success for Switzerland!” that includes the remark that the Obama administration witch-hunt in Switzerland has been “politically motivated” and “arbitrary”:
“The last few years, the stories of the battle of the Swiss banks against the US Department of Justice have unfortunately hidden the success story of Swiss-US business. While the politically motivated and sometimes arbitrary initiative of the US administration against banks is deplorable, it should not overshadow the Swiss-US business.”
http://www.amcham.ch/news/downloads/150821_Press%20Release_e.pdf
@Innocente…this thread is such a knee slapper!
Update:
As mentioned above, there is a recent trend of more US citizens physically leaving Switzerland than taking up residence in the country. The most recent month reported, July 2015, showed an approx. 1.1% decline in Americans living in Switzerland. All other figures are for the 12 month periods from July to June. These figures are for US citizens with a one-year or longer residence permit. Will plan to keep an eye on the monthly figures:
US Citizens Net Immigration or (Net Emigration)
One month only:
Jul 15 -232
12 month periods:
Jun 15 -402
Jun 14 -261
Jun 13 -145
Jun 12 407
Jun 11 439
Jun 10 507
Jun 09 878
https://www.bfm.admin.ch/bfm/de/home/publiservice/statistik/auslaenderstatistik/archiv/2015/07.html
2015 Distinguished Service Award Recipients
Annual gala to honor Senator Rob Portman and Deputy Assistant Secretary for International Tax Affairs Robert Stack
The Tax Foundation is pleased to announce that the recipients of its 2015 Distinguished Service Awards will be Senator Rob Portman of Ohio and Deputy Assistant Secretary for International Tax Affairs Robert Stack. The awards will be presented during the Tax Foundation’s 78th Anniversary Dinner and Gala on Thursday, November 19, 2015 at the Ritz-Carlton Hotel in Washington, DC.
Deputy Assistant Secretary for International Tax Affairs Robert Stack will be awarded the Distinguished Service Award for his leadership in defending U.S. interests as the lead delegate to the Base Erosion and Profit Shifting (BEPS) talks at the OECD. His efforts to redirect the BEPS process discussions towards sound tax policy have helped to move the conversation forward and away from an outcome that could be harmful to the U.S. tax base and U.S. businesses.
http://taxfoundation.org/event/tax-foundations-78th-annual-dinner?mc_cid=9fe8d7673c&mc_eid=6f30773d2e
@bubblebustin, re Stack and “His efforts to redirect the BEPS process discussions towards sound tax policy have helped to move the conversation forward and away from an outcome that could be harmful to the U.S. tax base and U.S. businesses.”
Mythster Stack gets an award – actually, for helping to maintain a system that abuses individuals ‘abroad’ with no economic connection to the US, while keeping the status quo for US resident businesses.
Retch.
I don’t know anything about BEPs, but Stack doesn’t like it when countries ‘go their own way’ re tax policies – unless it is the US going its own way. Stack; “…… questioned the role of a standard-setting body like the OECD, given the U.K.’s and Australia’s unilateral actions. “Do we need standards or don’t we?” he asked. “Two of our closest friends are going their own way,” he said. “How soon until others follow?” http://www.taxanalysts.com/www/features.nsf/Features/3829CF4979DEBA9A85257E65005C5915?OpenDocument
Right, so unilateral extraterritorial US FATCA extortion is good. Going your own way is good only if you are the US and you make everyone else conform. Standards are good – only if the US sets them and they benefit the US. ……
And another FATCAnatic says (re BEPS) with great hypocrisy;
““Congress is the steward of American taxpayer resources. Those resources are not bargaining chips for international agreements that may or may not advance our nation’s interests,” said Hatch. “Make no mistake, international cooperation and consensus are important. I don’t object to unified actions toward common goals and shared objectives. But, when the resources of U.S. taxpayers are on the line – as they appear to be with the BEPS project – Congress must play a significant role.”
Noting Congress needs more, detailed information regarding the costs relative to the benefits of the BEPs proposals, Hatch today asked the nonpartisan Government Accountability Office (GAO) to work with him to develop an in-depth analysis of issues, such as whether the IRS is capable of sharing sensitive tax information with foreign tax authorities without violating the confidentiality of American businesses, among others. Hatch further asked the GAO to look into how such policies would impact the U.S. economy.
“Before any additional steps are taken and before we can even consider moving on any of the BEPS action items, we need more information,” said Hatch. “I urge Treasury to work more closely with Congress on this and to not tie our hands as we move toward tax reform by consenting to bad outcomes. I urge them to consider the interests of U.S. taxpayers and to not make any commitments that would impose unnecessary burdens on American companies and put them at a competitive disadvantage.”
http://www.finance.senate.gov/newsroom/chairman/release/?id=cd38a30d-63ce-44d6-999d-9712e540f3be
More galling hypocrisy from the speech I cited above from Orrin Hatch:
“……..Last summer, Deputy Assistant Treasury Secretary for International Tax Affairs Robert Stack stated that: “Failure in the BEPS project could well result in countries taking unilateral, inconsistent actions thereby increasing double taxation, the cost to the U.S. Treasury, and the number of tax disputes.” “……
..”..while Congress continues to work toward this long-term goal, the Treasury Department is negotiating the BEPS action items – which may attempt to commit the U.S. to make changes to our domestic tax laws – without any substantive input from Congress or its tax-writing committees. .”….
..”.certain positions already agreed to by Treasury Department as part of the BEPS project could materially damage U.S. tax reform efforts.
Congress and the administration need to work together on these issues.
And, when I say “work together,” I do not mean that Treasury officials should only periodically come to the Hill in order to brief congressional staff on decisions that have already been made. I mean that administration officials should not make any commitments that could impact U.S. tax policy without adequate consultation and explicit agreement from Congress.
We all remember when, years ago, then-Treasury Secretary Geithner decided to reach an agreement with other officials in the G-20 regarding funding for the International Monetary Fund, or IMF. After reaching this agreement – without any significant input or consent from Congress – the Obama Administration presented – and continues to present – the issue of altered IMF funding as a quote-unquote international commitment that the administration made and Congress must honor. .”..
….”..Congress is the steward of American taxpayer resources. Those resources are not bargaining chips for international agreements that may or may not advance our nation’s interests. ..”….
..”………For example, consider the master file documentation scheme envisioned in the BEPS project. Under this proposal, companies would have to provide additional, detailed, and intricate information about their tax-planning and business models to foreign tax authorities.
If we impose this requirement on U.S. businesses, what assurances do we have that these foreign governments would keep the information confidential?
I don’t know, and no one from Treasury has told me.
What about countries with prevalent state-owned enterprises that would greatly benefit from this type of information? Wouldn’t the BEPS proposal force U.S. companies to reveal sensitive information to foreign governments that either own or substantially back competing enterprises?.”….
…”.We also need to know whether the IRS is capable of sharing sensitive tax information with foreign tax authorities without violating the confidentiality of American businesses. After all, the IRS doesn’t have the best track record. Between the fraud and overpayment rates on various refundable tax credits and other breaches of trust at that agency, we have more than enough reasons to be concerned about whether the IRS can effectively and appropriately implement a plan for global information sharing. .”….
..”.The U.S. has always recognized the right of other countries to tax income earned within their borders, to the extent such taxation is consistent with treaty obligations. However, regardless of what some in other countries may think, the U.S. tax base should not be up for grabs in an international free-for-all, and I expect officials at the U.S. Department of Treasury to remember that. .”.
Thanks to the US Congress, “Schreibtischtäter” such as Robert Stack, Mark Mazur, Kathryn Keneally and others, Americans in Switzerland have been on the frontline of the USG’s crusade against Americans abroad. A comparison of Schweiz Statistik data for three of the largest English-speaking groups in Switzerland illustrates the situation:
Americans resident in Switzerland:
Aug 2015: 17,507 (Sep 2015 not yet available)
Sep 2014: 17,936
Sep 2013: 18,221
Sep 2012: 18,262
Population decline of 4.1% since approx. start of crusade.
Canadians resident in Switzerland:
Aug 2015: 6,277
Sep 2014: 6,171
Sep 2013: 6,173
Sep 2012: 6,231
Slight increase of 0.7%
British resident in Switzerland:
Aug 2015: 41,201
Sep 2014: 40,809
Sep 2013: 40,121
Sep 2012: 39,200
Increase of 5.1%
These figures are for residents with a one-year or longer residence permit.
At this juncture, it is difficult to know whether Americans in Switzerland are just under pressure and the population will stabilize, or whether it is going the way of the dodo bird. Time will tell. Periodic updates to follow.