Who Does FATCA Affect?
The short answer is: just about everybody. At the top of the list are those who carry U.S. indicia and who live outside of the United States. In Canada these are estimated to represent approximately 3% of the Canadian population. Add to that their spouses and family members with whom they share accounts and a much larger figure is indicated (perhaps, as has been suggested by some, as great as 12%.) Publicity about FATCA has served to educate not only “overseas US Persons” about CBT (citizenship-based taxation) and FBAR (Foreign Bank Account Report) but also those who employ them or otherwise associate with them. US Persons are being asked to vacate positions with signing authority. Some couples are reconsidering marriage plans and getting divorced due to the understandable unwillingness of non-US spouses to have their personal and financial information shared with the government of a foreign country. Banks, particularly in Europe, are refusing services, including such basics as mortgage renewals, to “US Person” customers. The list of abuses is lengthy and I refer you to the reference links that I provide in Part IV.
In addition, there will be a risk of FATCA fallout to all bank customers outside the United States. FATCA, and the response to it by the world’s FIs (financial institutions), puts everyone with a bank account at risk of scrutiny for evidence of US indicia. This is a violation of everyone’s financial privacy particularly if a 3rd party is hired by the FI to perform this work as is, apparently, a possibility in the United Kingdom. In addition, it is estimated that implementing the systems necessary to comply with FATCA is costing every single FI in the world somewhere in the neighbourhood of 100 million dollars. This cost will undoubtedly be passed on to all their customers in the form of higher bank fees. And taxpayers of IGA signatory nations will be on the hook for implementation costs to comply with the terms of a FATCA IGA (Intergovernmental Agreement).
Immigrants to the United States who still have bank accounts in the countries from which they came are also in serious positions with regard to FATCA. Immigrants are welcomed to the United States every day but immigration officials don’t tell them about the requirement to file FBARs. With FATCA, these people who may hold accounts in their homelands for no worse a purpose than to help support elderly parents are now in danger of being penalized several times the value of each account that they have neglected to report.
Finally, America itself will feel the unintended backlash of FATCA and the CBT tax policy it has exposed and is now enforcing. The effects may take a great deal longer to be felt in America but already, around the world, people and institutions are divesting themselves of US content in their portfolios. They are seeking alternative markets and investigating alternative reserve currencies. The world may have agreed, in large part, to FATCA but it has done so grudgingly and at financial gunpoint. On a personal level, many people like myself are now frightened of traveling to the United States. In the past, cross-border shopping, winter vacations in the southern States and just visiting relatives were a way of life. Now we spend our money elsewhere and are estranged from our families. The list goes on (see references in Part IV) and none of it bodes well for the future prosperity of the United States and her people.
The Negative Consequences of FATCA
All told, FATCA is a ‘lose-lose’ situation on a massive scale. The many costs of FATCA are felt at the national, the corporate and the personal level. The costs are legal, financial, emotional and integral. First and foremost, FATCA uses the language of threat and intimidation to coerce submission from the rest of the world. Canada for example, the closest and most stalwart friend of America, has been coerced into destroying the carefully knit fabric of its inclusive society. Thanks to FATCA, Canada now has a law that allows Canadians of a certain national origin to be treated as foreigners by their banks.
Canada stands to lose a significant percentage of its tax base to FATCA as penalty money, back taxes, fines and fees (as well as $2,350.00 for every dual citizen who wishes to renounce her US citizenship) are levied against Canadian citizens who have unwittingly run afoul of a US tax law they didn’t know existed. A large number of affected citizens are retired people who came to Canada as babies or young children and have lived their entire lives here having organized their financial affairs like any other Canadian. Now, in their “golden years” they are discovering that as “US Persons” they are invested in all the wrong vehicles and stand to lose much of their hard-earned and hard-saved “nest-eggs” in order to pay a government to which they had no idea they had any financial “responsibility”.
One of the things that make a nation “sovereign” is its right to determine its own laws within its own borders. FATCA rides roughshod over Canada’s Charter of Rights and Freedoms as it transforms a significant number of Canadians into 2nd class citizens, citizens who have now lost their financial privacy, their right to a full range of investment options and even their right to have a bank account. FATCA has resulted in the institution into Canadian law of discrimination based on national origin which is strictly forbidden by our Charter. Meanwhile, our compatriots “down under” will have to contend with these words penned on p. 6 of the FATCA Regulatory Impact Statement issued by the government of New Zealand: “U.S. persons: Any avenues they may have to take action against financial institutions for breaches of the Privacy Act or Bill of Rights Act may be extinguished.”
With the signing of its FATCA IGA Canada is forcing me, and hundreds of thousands like me, to impale myself upon one of three prongs of a “Morton’s Fork”: #1) apply for a Social Security Number and start filing US tax returns at enormous annual cost of time and money; #2) be literally forced to officially renounce or relinquish my relationship with the land of my birth, at enormous cost both financial and emotional. (This is a huge issue, adequate discussion of which is beyond the scope of this article.); and #3) become a financial non-person with less than $10,000 in my own name, take my name off the title to my house, etc.
For the “free world”, FATCA, as the handmaiden of CBT, ushers in George Orwell’s Nineteen Eighty-Four just a few decades late. Sadly, the list of the world’s “Big Brothers” now includes the name of Uncle Sam.
@ MuzzlednoMore – have you considered having this entire series of presentations published in a major Canadian (or US) newspaper? Excellent writing, very clear, easy to read, understandable, this kind of information should be out there for not just us Brockers but ALL CANADIANS (and homelanders) to read and understand. And to understand why ADCS is taking the stand that it is. This needs to be put out there beyond the borders of those who have been following this issue and the people they email to back at the homeland. Globe & Mail? New York Times? Other suggestions, anyone?
That is telling them. Those bedeviled hapless souls in their golden years! The way you describe it I almost feel impaled on Morton’s Fork myself. Orwell is good to have in there. Yet no mention of tax treaty doublespeak. I always like the part of the American hypocrites who celebrate big time 4th of July, don’t understand the meaning of the 4th and the aims of the Founding Fathers, and don’t see or care about the injustices of their laws on US persons living overseas. The suspense for part IV!
Thank you MuzzledNoMore for bringing such clarity to this topic; enough that even those who are new to all of this will be able to build a true picture of the travesty of the trifecta: CBT, FBAR and FATCA. And thank you for the new term (for me anyway) — Morton’s Fork.
I second everything that LM above has said. I think you should try to get this published in major publications such as The Globe & Mail and the NYT.
This is a good series and I will beposting to my mp
thank you MuzzledNoMore… I hope you inspire the equivalent post from someone for UK!
Thank you so much for all your wonderful endorsements! I am really honoured! It would be lovely to see this picked up by a major newspaper or magazine. The problem is I am uncomfortable with putting my real name on it and journalists aren’t very happy about publishing anonymous material. But someone else would be welcome to submit it for me if that is possible.
My hopes when I wrote this were that perhaps the entire four part series could be posted in the sidebar as a resource for people to use when trying to communicate the issue to friends and relatives in the United States. I actually have a second article written with a Canadian audience in mind. I wrote it for my own use back when I was only lurking on Brock and this current series is an adaptation of it.
Anyway, if anyone can assist with getting it “out there”, they certainly have my blessing! I wish I was in a position to just be myself! I know that all of you are familiar with that feeling.
JC: A little preview of Part IV: I don’t get into the tax treaty thing but I do mention that famous little conflict of the 18th century in my final section. 🙂
I agree that this should be published in a major Canadian paper. Besides making a solid case in term of the big picture, you also have a knack for phrasing at the fine-detail level, e.g. “carefully knit fabric of its inclusive society”. This is excellent, newsworthy journalism, my friend!
I understand your desire to keep your real name private. Many writers feel the same way and use pen names. Couldn’t you?
Jan: Thank you so much! You are right; I could use a nom-de-plume but the problem is I would have to contact journalists from my own computer and those in my family who share the computer are not willing that I do that. There lies my problem.
JC: I just re-read Part IV in preparation for uploading it later today and discovered that I should have said “final section” instead of “final paragraph” in my note to you above.
@muzzlednomore, If you use library express computers to contact journalists, you’ll be using the library service provider’s IP address not yours. You won’t even have to use your library card. Better still, ask for a guest pass to get a full hour not just 15 minutes on express.
Look what popped up on my Yahoo Canada Finance page today! What a great report by Global News. At least this is getting some media attention, and although the report is two months old it came up on my Yahoo homepage today.
@muzzled, I would suggest Harper’s magazine, it is a literary magazine with a liberal audience (maybe not what you want). But you have to write to them snail mail and with a self-addressed stamped envelope in case of the inevitable rejection.
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@DJ thanks for posting that link. It all helps.
I hate it when people produce multi-part pieces with no link to earlier parts…
I wonder how many other people came AND JUST LEFT….?
@ Inalienable Wrights,
At the top of the article “FATCA: An Introduction … Part III,” there’s a link “Continued from Part II,” and so on with the other chapters. Also a link at the bottom of Part III, “Continued in Part IV,” etc.
There is also, at this link, a table of contents to “FATCA: An Introduction …” with links to all 4 chapters and a listing of the contents of each chapter. This table of contents page also has a link to a PDF of the entire article as one document. (You can also access this table of contents in the Sidebar box “Important Information” under “Introductory Materials.”)
Hope this helps.