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.
This is a shameful piece of propaganda which has become so typical of the USA. Astonishing in its level of arrogance and pitiful in its level of cowardice, choosing to propagate its own myths rather than address the very real problems which Treasury and the IRS are causing across the entire world. It’s reprehensible.
@notamused, it feels good to not be American! For me, this is no surprise, though. I’ve always had this opinion of the demorepublican dictatorship. It is way too corrupt to say “sorry”.
Would love to see the organized response to this.
What Mr. Stack does not realize is that he has just escalated the coverage of this issue to a higher level which will garner more extensive media and political coverage.
Since he is dead wrong on all his points, his move will backfire badly for FATCAnatics.
I just stumbled upon Paul Graham’s Hierarchy of Disagreement: http://commons.wikimedia.org/wiki/File:Graham%27s_Hierarchy_of_Disagreement.svg
At best, Robert Stack’s article rates a “contradiction”: states the opposing case with little or no supporting evidence.
Rebuttal for Stack Myth#7;
Not just ‘some individuals’ say that FATCA turns foreign banks into agents, arms, extensions of the IRS and US Treasury. Lots of articles, and authors in major news and other sites characterize it the same way, including our *Finance Minister in Canada. So, which is more credible? Robert Stack agent of the US, or all the rest of the world? Of course, as a lawyer, he could argue that truthfully, many of the characterizations were indeed literally said by ‘some individuals’. Of course, banks, industry groups and other organizations have said the same – either in those very words, or in essence.
In any case, the same ‘myth’ he is trying to rebut is everywhere, said not just by ‘some individuals’.
Examples include:
* …”FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians.”
Quote from letter written by Canadian Minister of Finance Jim Flaherty, and published in the Financial Post ‘Read Jim Flaherty’s letter on Americans in Canada’
Suzanne Steel | 16/09/11 | Last Updated: 26/04/12 5:18 PM ET http://business.financialpost.com/2011/09/16/read-jim-flahertys-letter-on-americans-in-canada/
…”Minister Flaherty’s September 16, 2011 letter complains that the long reach of these U.S. rules will cause Canadian banks to become “extensions” of the IRS. Flaherty also notes that the rules raise privacy concerns for Canadians who may not be aware that they needed to file U.S. tax returns. And beyond tax returns, the FBAR rules and their horrendous potential penalties are particularly draconian….”
and, “….not to mention the long arm of the IRS that is now in their front yard…..”
Robert Wood, 10/24/2011 @ 6:06AM |10,057 views
‘Oh Canada! Hating FBARs And FATCA’ from Forbes.
http://www.forbes.com/sites/robertwood/2011/10/24/oh-canada-hating-fbars-and-fatca/
‘How to Lose Friends, Citizens and Influence
The U.S. Foreign Account Tax Compliance Act seeks to co-opt foreign banks as long-arm enforcement agencies of the IRS.’ Colleen Graffy, Wall Street Journal * Updated July 17, 2013, 9:20 a.m. ET
http://online.wsj.com/article/SB10001424127887323848804578607472987119796.html
…”…FATCA has been called the neutron bomb of international banking. It effectively makes banks the gatekeepers and arms of the Internal Revenue Service (IRS)….”
quoted from Stanley Foodman, “forensic accountant and litigation support practitioner, specializing in international tax. He has served as an expert witness and forensic accountant for some of the nation’s most complex, high profile tax and other economic crime cases. He is a former auxiliary special agent for the Florida Department of Law Enforcement with specialization in economic crime – anti-money laundering, bank fraud, public corruption and discovery of hidden assets. He serves on the advisory board of the International Association for Asset Recovery (IAAR). ” quoted in ‘Understanding the Impact of the Foreign Account Tax Compliance Act (FATCA)’ http://www.sflegalguide.com/fatca.html
“The unusually broad regulation, known as FATCA, or the Foreign Account Tax Compliance Act, makes the world’s financial institutions something of an extension of the tax-collecting Internal Revenue Service — something no other country does for its tax regime.”….
from Reuters,
‘Analysis: Critics say new law makes them tax agents’ By Lynnley Browning
NEW YORK | Fri Aug 19, 2011 9:08am EDT
http://www.reuters.com/article/2011/08/19/us-usa-tax-fatca-idUSTRE77I38220110819
Then there are the heavy hitters like Scott D. Michel and H. David Rosenbloom – who appeared in front of Canadian Parliamentary committees discussing FATCA http://www.parl.gc.ca/HousePublications/Publication.aspx?Mode=1&DocId=5971039&Language=E at which MPs from several major parties attended.
see the anti-FATCA comments quoting Michel and Rosenbloom in the WISCONSIN LAW REVIEW article 2013:205 , page 233, footnote 181 from ‘USING A SLEDGEHAMMER TO CRACK A NUT: WHY FATCA WILL NOT STAND’ by FREDERIC BEHRENS’ http://wisconsinlawreview.org/wp-content/files/8-Behrens.pdf
“Footnote 181 – Scott D. Michel and H. David Rosenbloom of Caplin & Drysdale state in
their call for the repeal of FATCA, “it is becoming increasingly apparent that the
backlash from FATCA, the burden on IRS regulation writers, and the enormous cost of
compliance are not worth the tax revenue that FATCA is likely to produce or to justify
the other benefits of enhanced compliance.” Michel & Rosenbloom, supra note 128, at
713; see also Foreign Account Tax Compliance Act (FATCA) Comment Letter to IRS and
Responses, DELOITTE, http://www.deloitte.com/view/en_US/us/Services/tax/by-
issue/fatca-resource-library/e7d4e74a9f948310VgnVCM3000001c56f00aRCRD.htm
(last updated Nov. 15, 2012) (listing letters submitted to the IRS against FATCA).”
That is just a small sample. If more is needed, look here:
http://www.google.ca/search?q=foreign+banks+arms+extensions+agents+irs+fatca&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&gws_rd=cr&ei=w0A_UvaQKIWGyQG-joCICA
You could use specific industry lobby group names like the CBA in the search as well, or the FATCA submissions archived here:
http://bsmlegal.com/fatca-comments.asp
and, here
http://www.deloitte.com/view/en_US/us/Services/tax/by-issue/fatca-resource-library/e7d4e74a9f948310VgnVCM3000001c56f00aRCRD.htm
which has a useful sortable feature – pre-FATCA and post-FATCA letters and submissions
@Yogagirl @CanuckDoc, yes I wouldn’t worry about the way they word things too much. Same old, same old. I’ll file 8854 and be out just as they say you can do. They’re just trying to make it look like a lot of people are renouncing over “taxes” For the vast majority it’s not taxes and we’ve made that point over and over. They don’t get it because they don’t live outside the U.S. They think the reporting regime is something everybody is used to, can afford, is justified. They don’t see how ludicrous it all seems to those who don’t live there and never will see that. Really, if they wanted FATCA to function more efficiently they’d give long time expats, accidental Americans and other low risk folks an easier path out once and for all. All this filing, and forming and rule reading for so long is holding up the line. Maybe they can let you hand the 8854 over the same day you go to the consulate all to be bundled up and sent in letting you out the same day you renounce. Something/anything would be better.
But, you will be out and free once that form is filed. They don’t want you to move away from the U.S., they don’t want you to be dual, they don’t want you to relinquish or renounce. If you do any of the above you’ll be in their punishment regime. However, there is an end to it. Eventually.
Stack O’ Lies
Could be on a rainy morning
Could be on a rainy night
Oh, Stack O’ Lies and Ally DeWorld
Had a great big fight
cho: Talkin bout that bad man, bad man
Cruel old Stack O’ Lies
“Stack O’ Lies “, said Ally,
Man you know I can’t go with that
I done worn all your money
and your great big Stetson hat
“Stack O’ Lies “, said Ally,
Please don’t take my life
I got two lovely children
And a very lovely wife
What do I care about your two little babes
Or your darling life
You done wore my Stetson hat,
I’m bound to take your life
Well Stack O’ Lies taxed Ally
Taxed that boy so bad
That the bill went through Ally
And broke the banker’s looking glass
If you ever down in Louisiana
go in to the Lyons Club
Every foot you be steppin’ in
Ally did lie in blood
Could Be on a rainy morning
Could be on a rainy night
Oh, Stack O’ Lies and Ally DeWorld
Had a great big fight
@Mark Twain
You’ve made my day!
@Mark Twain
I loved this version of “Stagger Lee” from the moment I heard it a couple of years ago. By Jeff Lang and the now deceased Chris Whitley:
http://grooveshark.com/#!/s/Stagger+Lee/2LydWR?src=5
There is a book devoted completely to Stagger Lee–certainly you can google it. Read it about 7 yrs ago, about the same time I took a bimbo out to listen to Zydeco music in Norway, where she jabbered through a Zydeco version of Stagger Lee.
Mark Twain, you’re taking me back to my New Orleans roots…
@Mark Twain
That would have been something to hear.
@Jane Doe belge
Only time I went to New Orleans was when I did this driving tour of the US in August. We drove from BC in Canada down to the Grand Canyon over to see my father in N Carolina then down to the Florida Keys. We then went across to New Orleans and then back home through Yellowstone Park. There is amazing climate and geographic diversity in the US. Our brief stop in N Orleans included a walk through the French Quarter and a grave yard. They have amazing grave yards there. I would have loved to have taken in some music there, but no time.
The Treasury Dept is re-iterating on twitter that NO ONE will give up their US citizenship because of FATCA and that it is only a myth that that is happening. What a bunch of bull.
Treasury Department @USTreasury 8m
MYTH: Some claim Americans living abroad will give up US citizenship b/c of liabilities & burdens created by FATCA http://www.treasury.gov/connect/blog/Pages/Myth-vs-FATCA.aspx …
Twitter as propaganda tool – COOL!
@Tim, no surprise there. I’m really getting motivated to sell my house in Florida to further cut my ties with the US. If I have time tomorrow, I’ll call an agent to see what he thinks.
“The Treasury Dept is re-iterating on twitter that NO ONE will give up their US citizenship because of FATCA and that it is only a myth that that is happening. ”
Well I guess that makes us all mythical creatures then. If anyone related to any US govt. agency ever tries to contact me I’ll tell them to have their head examined because people like me don’t exist. I’m a myth.
I wonder what the US consulate staff is doing all day if they are not conducting relinquishment and renunciation appointments as they claim to be doing.
DISINVEST IN USA!! Get every dime out that you can. EVen the investments that are jailed in IRAs are coupled to the US dollar Printing press. With inflation over the course of a few breakeven years, the 10% penalty is like a get-out-of-jail free card.
http://www.lexisnexis.com/legalnewsroom/tax-law/b/newsheadlines/archive/2013/09/24/aba-meeting-treasury-no-longer-taking-meetings-on-fatca.aspx
”
09-24-2013 | 05:33 AM
Author: TaxAnalysts®
ABA Meeting: Treasury No Longer Taking Meetings on FATCA
Because of strained resources, Treasury is no longer taking phone calls or meetings with stakeholders to discuss matters relating to the U.S. Foreign Account Tax Compliance Act, Brett York, attorney-adviser, Treasury Office of International Tax Counsel, said September 20…….”
Use link to read rest of abstract. No open access to the fulltext.
Notamused: US consulate staff is probably 80-90% occupied with people applying for visas to visit the USA. I should know I have been there twice in the past year and several times before. There is always a crowd outside at 9 am (this is Vancouver). I always get ushered by the crowd at least, maybe 5 in 100 have other business. I do not need a visa of course and even after I renounced I still do not need a visa. Just form 8854. Has AtticusinPanic renounced/relinquished yet?
@MTwain, I agree except it’s more like paying $50 to get out of jail. TD Bank owns a lot of branches in the US now and is being held hostage to Washington-made regulations like FATCA. It is a scandal that Canadian banks, which have favored-status in Canada having their oligopoly protected by Canadian regulations, are now slaves to DC-instituted regulations. Is it worth it? Today we learn that TD has agreed to pay 52.5 million in penalties for violations of law by US-bank vice president who committed fraud related to a ponzi scheme. How’s that US-based bank investment turning out? Why does the Canadian federal government allow their sweetheart banks to invest in the hard-earned money of Canadians in the sink-hole of investment called the United States? Could it be that the entire bank system is a cesspool of corruption?
Yes. The entire bank system of the world is corrupt. If you Believe 10% of what SImon Black writes or 5% of what Jesse Ventura writes or if you simply read between the lines of anything mainstream. If Norway hadn’t been the first on the FATCA bandwagon I’d say move half of your savings there.
Stack-o-lies may be right when he says that FATCA isn’t causing the renunciations. How much is it FATCA, or citizenship based taxation enforced by FATCA that’s the cause of the renunciations? Of course I have no way of knowing, but I don’t believe that those being shut out of banking services make up a significant number of those renouncing. Certainly no one I know of in Canada.
@badger
No more meetings on FATCA because “Treasury has to conserve its resources to focus on negotiating intergovernmental agreements and drafting substantive guidance, forms, and other agreements” ?
I don’t know how you can negotiate an agreement without meeting in some way with the other party, unless of course they’re using the world “negotiate” as a euphemism for “dictate” and meetings are no longer necessary. Flaherty said they’re still talking to Treasury as of last couple of weeks.
@Kermitzii, Who is AtticusinPanic? And why don’t you directly ask her/him your question about her/his renunciation status, rather than pose it as a general question for any Brocker to respond to? Just wondering.