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OECD’s Plan for Global Tax Info Exchange: Could be Deja Vu All Over Again

Posted on by Posted in Issues regarding US persons abroad 25 Comments

 
By Allison Christians

allison_christians_2012_150x225The OECD has released its “Common Reporting Standard,” a.k.a. a global “Standard for Automatic Exchange of Financial Account Information.” The plan more or less tracks the so-called “intergovernmental agreements” (IGAs) that the US Treasury is using to try to get the Foreign Account Tax Compliance Act working. But the OECD’s model for the world differs in two critical respects:

1  it is based on the global standard of residence-based taxation

2  it would require reciprocity

One obvious question is whether the US would sign on to this standard, since it represents a major reduction of the massive expansion of the US taxpayer base contemplated by FATCA. If not, can one really envision a world in which everyone shares data reciprocally except the United States, which not only does not share data reciprocally but also places the most expansive demands on everyone else? (For those not following along, the US claims people based on their legal status in the US as well as their actual residence, in contravention of the global norm reflected in the OECD standard, which rejects the former claim in favor of the latter. In terms of reciprocity, what the US calls reciprocal with respect to data sharing is so far reciprocal in name only).

A related issue that already exists under FATCA and will be expanded exponentially under the OECD plan is that reciprocity means every government bears the cost of incorporating expansive financial surveillance (in the case of the US, far beyond that required for all other countries) yet as the Tax Justice Network points out, this formal equality in fact introduces substantive inequality and potentially great harm to poorer countries.

Readers of my prior work (on soft law, on the OECD’s norm-creating role, and on its grappling with the issue of sovereignty) will know that I am cautious about the premise of accepting proclamations of the OECD about “global” tax norms.

In the case of residence-based taxation, however, this is not an OECD-created norm but one that dates to the very beginnings of modern income taxation and while flawed is the best available structure if more than one country in the world is going to have an income tax and people are going to be allowed to leave their countries freely if they so choose. Relax either of those assumptions and legal status-based taxation might become technically feasible, though it would still be fundamentally unjust. Neither is the reciprocity norm an OECD invention: instead, its roots trace back to post-Westphalian fundamental international legal principles.

The OECD’s forging ahead with a plan that more or less relies heavily on US acceptance is eerily reminiscent of the last OECD attempt to curb tax evasion, via the harmful tax practices initiative. The US first supporting and then completely reversing course eviscerated that effort, thus cementing the status quo we witness today.

US exceptionalism with respect to who should be considered its residents and what it can be compelled to share with other countries cannot help but perpetuate a grave reciprocity imbalance that will only be exacerbated if the US does not sign up to the OECD standard, and the OECD accepts a carve-out to accommodate it.

Given that efforts toward a repeal of FATCA and an ongoing legal challenge to data reporting by US banks are currently unfolding in the US, the OECD’s report comes at an interesting juncture in the process of picking up where the harmful tax practices project left off. It could unfortunately foreshadow a repeat of the events that unfolded in that project circa 2001. Or, more optimistically, it could be that the OECD report is a means of giving the US a reason and the political cover to bring its antiquated status-based tax regime up to date with the global residence-based standard, and its one-sided view of the value of data sharing in line with how the rest of the world views things. That would make global automatic data exchange of offshore financial accounts a much more clearly positive development overall, leaving room to focus on solving the other outstanding issues. Only time will tell which way this will unfold.

Cross-posted  with permission from Allison Christians at Tax, Society & Culture

http://taxpol.blogspot.ca 

25 thoughts on “OECD’s Plan for Global Tax Info Exchange: Could be Deja Vu All Over Again”

  1. I’ve always thought the timing of the OECD’s tax info exchange was too much of a coincidence to not be part of a broader plan. Allison Christians has confirmed that suspicion. Similar efforts failed not so long ago – why try again, unless there was hope for a better outcome?

    I still thinking it’s being done to replace FATCA, which I’m sure the US knows it can no way carry off with the state of affairs as they are in the US. Allison has renewed my hope that the FATCA boondoggle may soon be coming to an end, or, the US is more of a bully than I could ever imagine it to be.

  3. It seems The Black Market, Agorism and Anarchy are the only viable options to assure your own economic status and liberty in the face of Leviathan governments across the globe.

    The Sinaloa Cartel is a perfect example – the only way to be respected by the State is to be an Outlaw.

    I quit groveling a while ago. When are y’all gonna stop?

    The Beast only has the authority you grant it.

    The Boot-Strap Expat
    http://thebootstrapexpat.com/

  4. The US is a bully of the worst order.
    They will enforce FATCA and FBARs without remorse, compassion or regret as they choose.

    Don’t expect any miracles now that the Canadian government has caved – the only hope is the Canadian courts. In the meantime take all steps to protect yourself as this applies to you.

  5. The world is slowly learning about Fatca and honestly seeing it for what it is. Obama knows that it is destroying families while trying to pretend this is a good thing going after “tax cheats” He knows the problems this is also causing expat families as a whole. Why he is ignoring this, I don’t know. I do know this, try to find someone affected by it who supports it. Better yet, try to find a US person who still wants to be a US person today. The outcome of this is going to have terrible consequences for the US. I wish they were smarter than that, but they are not. It is slowly unfolding. The court costs to Canada will be staggering, and once educated, other Canadians will support a full charter challenge. If 1 person is deprived of their rights in Canada, we ALL support each other. All people’s in Canada are protected, Seiks, Muslims, polish, Italian etc etc. They ALL are at risk if even 1 of them is not protected. We are all learning here and the biggest student to learn the outcome will be the Canadian Government. Godspeed to all who signed Fatca.

  6. Nobody wants to see people hiding their money elsewhere to avoid taxes. It was never really OK for banks around the world ( and I mean american banks too) to harbor the money of a corrupt African president who was robbing his own people. It was never Ok for American banks to take the drug cartell`s blood money either. Maybe if everybody was made to have a bank account in their country of residence – that would make a difference? The banks have been complicit in these tax cheats for a long long time, and now they are being saved by the bell!
    But when is America going to see the cost of CBT for their country? The hatred that ensues, the draining of foreign treasuries, the fact that nobody in his right mind would want to be an american citizen anymore unless dirt poor- dont they see the long term consequences? Is anybody here going to be buying american products in the future? Is anybody here going to take vacations in America? I`ve heard among my non-american friends that nobody wants to go there because they are afraid of being held at the boarder or cavity searched with no means of recourse- because America says it can. America is becoming so unpopular and so are their products. It goes hand in hand- it is such bad public relations.
    So for these penalties that they hope to cash in on (and it isnt taxes because in so many instances none or little would be nor will be owed)- they want to risk their whole economy? Thats just so insane. But perhaps they feel they can survive on their own merit without needing any other consumers but their own? I dont know how that works.

  7. FATCA should be considered only ‘work in progress.’ Harper signing an IGA isn’t the final word. All that he’s is pass the issue to the courts and parliament.

    One thing that stirs people up more than paying taxes to their own country, is another country trying to tax another and getting nothing in return.

    FATCA may be the issue where the US learns the lesson of ‘place.’ With only 19% of the world GDP under the US roof and shrinking, a process of de-dollarisation going on in the world, this may be the US’s final attempt to impose its authority on the world.

    US Senators and Representatives should get out in the world more rather than flying business / first class to far distant lands only to stay at the Ritz or US Embassy watching CNN being escorted around in US made vehicles with diplomatic plates. In there mind they think they’ve really visit a foreign country, they’d be wrong.

  8. @Polly

    *Nobody wants to see people hiding their money elsewhere to avoid taxes*

    Many are under the assumption they are hiding the money because of taxes. Ok.. bad people who got the money via corruption or whatever are hiding it. I lived in different places. Had a life there. I opened accounts with after tax money I brought or money I made there or an inheritance & paid taxes on it. When we left… we didn’t close out the accounts.. no tax were paid because there was no need to report interest or capital gains. Plus I had expenses in that country to take care of still such as hydro.. other taxes.. spending money… etc… that the accounts are needed. Never thought it was a big deal. I thought if I paid taxes on it & just saved it somewhere else.. not a biggie cause u know there is not much interest paid. Its like someone who took the money from the bank & bought something with it.. instead of me buying something.. I just saved it somewhere else. I never thought I was doing anything wrong. Its what I like to call the mindset of an immigrant. Even though I am canadian.. my family background are immigrants who are taught to save. We move around… we get there.. first thing we do besided getting a place to live, open a bank account… cause it was safe.. And a new life starts. Lots of immigrants still do that… Stupid me.. should have dumped it in a hole & drew a map to it if I knew. I did not understand the use of off-shore.. just thought it only applied to rich people… seems it includes me & my family because we have the US taint via the gc. Sorry I am being long winded… just irks me when people think that offshoring funds was to hide from taxes. I already paid the taxes on it.. how is it fair for the principal & interest get taken now?

    We did not *hide* the money to avoid taxes. Where we live… they know all about it. Corps are the real criminals who off-shore with the help of the US.

  9. With regard to the legal costs for a Charter challenge the cost may well be mitigated significantly if Prof Hogg and others take it on pro bono in the public interest. This is a text book case for a law school or civil liberties group to handle it basically for free as a class action.

  10. @Steve Klaus

    Actually it would be great publicity for them if they picked up the cause pro bono. Any time u hear that crappy name… fatca… & people who challenged it.. u will remember their names in the news & history. Cause I know… this PM will be remember in history as the biggest frigging traitor to me & my family. Can’t say his name without a curse attached

  11. @US_Person_Foreigner
    I dont quite understand what you did or how you chose to lead your life, but people here were just living their lives abroad. The point I was trying to make is how America is shooting itself in the foot. I live in Europe and nobody wants to be a tourist in America anymore, nor buy US products, and FATCA is making the animosity towards America all the worse, as well as causing America to lose the wealthy and stop people from getting signatory positions in the work force. Its bad for AMERICA- which is why some republicans would like to have it repealed.

  12. @Steve Klaus & US_Foreigner

    It is my understanding that Peter Hogg has indicated he does not want to take this case. I don’t remember where I saw that but I do remember it.

  14. I’m trying to increase awareness across a broader audience with an essay I published yesterday titled The Tyranny of Citizenship.

    It’s not meant to be detailed as discussions are here, just to get folks thinking about expat realities.

    I’d appreciate any criticism or suggested edits.

    The Boot-Strap Expat
    http://thebootstrapexpat.com/

  16. And how will our privacy and Charter rights be affected under any OECD agreement?

    See:
    ‘OECD agreement promises Fatca for all’
    Author: Alexander Campbell
    Source: Operational Risk & Regulation | 17 Feb 2014

    …….”…..Michael Edwards, chief counsel at the World Council of Credit Unions in Madison, Wisconsin, adds that privacy concerns may be another stumbling block. “Information sharing through a central hub is logical but it raises questions under various countries’ privacy laws. One of the reasons it took Canada so long to sign a Fatca IGA was because of concerns about the Canadian Charter of Rights. Hopefully the IGA addresses the Canadian issues but with all the data breaches we have been having, any centralised hub will raise privacy concerns even if it is totally lawful.”…
    http://www.risk.net/operational-risk-and-regulation/news/2329081/oecd-agreement-promises-fatca-for-all

  17. Further to badger’s comment, we are seeing Just Me’s words come to life:
    FATCA begets GATCA in our frightening future.

    From Roger Conklin this morning:
    http://www.thenewamerican.com/economy/item/17643-globalists-unveil-socialist-backed-new-world-tax-regime

    Finance bosses for G-20 powers are expected to sign off on it later this month at a meeting in Australia.
    …
    The New American first reported on the G-20 and OECD global-tax plot early last month.. Backed by socialist luminaries and international bureaucrats at various outfits funded primarily by U.S. taxpayers, the planetary regime is being pushed under the guise of ensuring that governments can collect as much tribute as possible. The global plot is admittedly based on a “devastating” new Obama administration taxation scheme known as the Foreign Account Tax Compliance Act, or FATCA, which purports to force all governments and banks worldwide to become agents of the IRS. Some analysts and critics of the OECD’s international version of the regime have referred to it as “GATCA.”

    “This new standard on automatic exchange of information will ramp up international tax co-operation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion.”

    The repercussions of the OECD scheme for Americans and people around the globe — especially when it comes to financial privacy and economic freedom — will be crushing, experts argue.

    Of course, the staggering financial costs of implementing the new regime to abolish financial privacy worldwide will ultimately be paid by the victims of the scheme: consumers and taxpayers forced to pay higher prices and more taxes to have their rights trampled on. Perhaps the most troubling aspect of the scheme, however, is that it comes on the heels of openly declared plots to fleece humanity under the guise of propping up debt-laden bloated governments that borrowed trillions of dollars to bail out big banks and other cronies amid the economic crisis.

    and

    http://www.risk.net/operational-risk-and-regulation/news/2329081/oecd-agreement-promises-fatca-for-all

    OECD agreement promises Fatca for all

    A proposed agreement on automatic sharing of tax data between governments, released by the Organisation for Economic Co-operation and Development (OECD), promises to extend the data exchanges included in the US anti-tax-evasion law Fatca to all participating governments – but the full details of how the process will work will not be decided until later this year.
    …

    The OECD has based its template closely on the Model 1 Fatca IGAs, in which national authorities collect information from their own banks and pass it on to the US, rather than the Model 2 IGA under which non-US banks report to the US directly. But there are still important differences that Matthews says need to be addressed, such as “the lack of a de minimis threshold for existing individual accounts. These will mean that firms cannot simply assume a ‘read-across’ and will need to get into the detail to ensure compliance.”

    The OECD hopes to create a process of data exchange not through the existing web of bilateral agreements (such as IGAs, or the UK’s similar agreements with its dependent territories) but through a multilateral agreement based on its common standard. But, Matthews adds, it is still unclear how this will happen: “Even the existing Model 1s do not sit perfectly with each other, and there are also differences between the US IGAs and the UK IGAs, adding to the complexity.”
    …privacy concerns may be another stumbling block. “Information sharing through a central hub is logical but it raises questions under various countries’ privacy laws.
    …
    The lack of reciprocity in Fatca will make not only an OECD-type agreement, but any existing IGA, hard for US banks to implement. Fatca does not require US institutions to collect data on their non-US customers, but this collection is fundamental to IGAs, under which individual countries agree to mutual sharing of data with the US on the bank details of their citizens in the other’s jurisdiction.

    Collecting this kind of information for foreign account holders in the US will require new legislation – but this was blocked when the Obama administration tried to introduce it as part of the 2014 budget.

  18. @Polly

    I was being long winded & taking a curvy road. Basically I was trying to say… No other country I have lived in treats their residents & citizens like criminals like the US just as u said… People use to be proud to have an association to the US… now… no one wants anything to do with the US. Residents in other countries are not treated like this such as what the US is doing… so u have a resident card… u left… what the heck do u care. Guess now I know… they want to empty my pockets.

    @Trishia

    I read it on this web site that he had no interest either. For people who said alot of stuff in protest but when it is time to put up… they all seem to be saying.. umm… not my cup of tea. Btw… I saw a blurb about the pipeline, PM, & Obama.. basically Obama saying to PM… will get back to u… soon.. Idiot PM couldn’t have use the same tactic for this crap???

  20. Great interview, Prof. Christians! Nobody could listen to that without getting a very clear picture of CBT, RBT, FATCA, IGA, etc.

  22. @ ALL
    Could someone with the right profile ask Prof. Christians in a comment at http://taxpol.blogspot.ca/ if the McGill Law Journal podcast she did will be kept in their archives? I would like to direct attention to it as a teaching tool in some e-mails I’m working on but not if it might disappear. Not too sure how it all works obviously. Thanks.

  23. The Telegraph from London contains the following article http://www.telegraph.co.uk/news/worldnews/10643889/Kim-Jong-Un-warned-he-could-face-prosecution-for-crimes-against-humanity.html

    The Telegraph article, inter alia, contains the following paragraphs:

    Start Quote

    Michael Kirby, a retired Australian judge who has spent nearly a year taking testimony from victims of the regime, said much of it reminded him of atrocities perpetrated by Nazi Germany and Pol Pot’s Cambodia.

    Yesterday his team published a 374-page report detailing allegations of murder, torture, rape, abductions, enslavement, and starvation, describing North Korea as a dictatorship “that does not have any parallel in the contemporary world”.

    End quote

    North Korea is an extreme contemporary example of what can happen to people when Governments are out of control … too much power in the hands of Governments and Bureaucracies give them the urge to go out of bounds … as President Clinton infamously said (paraphrased) “I did it because I could” … lack of privacy amongst the people grants that power to said Governments and Bureaucracies. FATCA / GATCA are abominations in that they seek to provide Governments with far too much information on the people and thus far too much power.

    The use of Government powers to persecute sections of society is an outrage … is facilitated by excess information in the hands of Government and is indeed used as is currently happening in the USA through the use of the IRS to persecute conservative groups which action is being encouraged and asked for by certain Democrat Senators fearing the upcoming elections.

    FATCA / GATCA are immoral tools designed to suppress basic human rights and freedoms.

  24. OECD: the United States can remain a tax haven
    Translated from an article in French:

    http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.lesobservateurs.ch%2F2014%2F02%2F21%2Focde-les-etats-unis-peuvent-rester-paradis-fiscal%2F

    “The United States has managed to introduce a clause allowing them to avoid the new international standards for automatic exchange of information set up by the Organisation for Economic Cooperation and Development (OECD), which adheres Switzerland and made ​​public last week.

    […] “Do not be afraid of words emphasizes Jürg Birri, head of the department of law at KPMG auditor for German-speaking Switzerland. What has been succeeded in the United States is difficult to accept. They use the specificities of their FATCA legislation to divert the new global law against tax evasion seeing the day and participate in tax evasion by non-Americans. “”

    How is that acceptable to the rest of the world?

  25. Thank you, noone.

    This must be highlighted to our government representatives who have negotiated IGAs with the US. They are all being taken for fools if this is accepted!

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