Post authored by Bubblebustin for you…
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This feature article covers what James Jatras told us long ago when he said that the FATCA IGA’s are “dead on arrival”. The US Congress will not pass the legislation to make these IGA’s truly reciprocal, but my question is,
Will our governments choose to ignore this fact when our banks are running scared?
It’s up to each any every one of us to tell our MP’s that the banks should not collect the private banking information on EVEN ONE CANADIAN when the US isn’t holding up it’s end of the deal!
This confirms my worst fear, that our governments may turn a blind eye to the US’s lack of legislative authority on this matter, again sacrificing us just to make things run smoothly for the banks. Is there any reason to think they’d act otherwise?
“Some governments were enticed to sign the agreements with promises for reciprocal information sharing. That means implementing FATCA-style reporting requirements on U.S. banks, a costly prospect not authorized by FATCA and thus requiring new action by Congress to implement. But adding expensive new obligations on domestic banks and discouraging foreign investment in the American economy are not popular ideas among U.S. politicians, particularly Republicans. For this reason, reciprocation will be a non-starter with the new Congress.
The administration might try to accomplish the same goal through regulatory action. There are legal and legislative tools available to Congress to override executive regulations, but they are rarely used. But with both chambers of Congress now in Republican hands, concerted opposition through use of conventional political tools such as oversight hearings may prove sufficient to prevent potential regulatory overreach via pursuit of domestic FATCA information collection and dissemination. Of course, obstacles to reciprocation will only matter if foreign governments bother to object to unfilled American promises.”
The response I got from my MP, John Weston’s office after I brought up my concerns about this in a face-to-face meeting with him AND in a follow-up letter to that meeting was this:
“Hi [name withheld],
Thank you again for meeting with John and I at the sunshine coast office, it was good to see you. You had inquired as to if the Intergovernmental Agreement was reciprocal (“IGA”). The IGA is indeed reciprocal in that the US retains the same obligations as Canada under the IGA. American financial institutions will report information on Canadian residents with accounts in the US, to the IRS. The IRS will then share that information to the IRS through existing tax information exchange provisions.
The IGA did not require Congressional approval in the US as only executive approval was required.
The terms of the IGA came into effect in July 2014.Kind regards.
Sue
My response to my MP’s complete lack of interest in taking advantage of the US’s vulnerability within the IGA?
“Dear Mr Weston,
Thank you for your response to my follow-up letter to our meeting, via your assistant Sue McQueen.
Whether the FATCA IGA is an executive agreement or one that required congressional approval is a matter of legal debate, but if what you’ve stated is true, where’s the quid pro quo? The US will now receive the private financial information of US persons residing in Canada. Being relieved of the threat of economic sanctions against Canadian banks is NOT quid pro quo – it’s caving in to another nation’s extortionate demands. Please tell me what benefit any Canadian will receive in exchange for handing over this additional information on Canadians to the US? (Remember relief from extortion is not a benefit in a world where lawmakers choose to defend its citizens ahead of private banks who’ve taken the risk of exposing themselves to foreign markets).
It would appear that many of the benefits “promised” to Canada under FATCA still require congressional approval, approval which is unlikely to happen. These promises include the reporting of information on Canadian citizens living in the US, the reporting of account balances of Canadian residents, the reporting of information on accounts held by corporations that happen to have resident Canadian shareholders (above 10%), the reporting of interest paid to Canadian residents from non-US sources. Just today President Obama made a request that Congress impose reciprocal FATCA reporting – AGAIN:
Provide for reciprocal reporting of information in connection with the implementation of Foreign Account Tax Compliance Act (FATCA).—In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts. Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS. Requiring U.S. financial institutions to report similar information to the IRS with respect to non-resident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents. The proposal would require certain financial institutions to report the account balance for U.S. financial accounts held by foreign persons, expand the current reporting required with respect to U.S. source income paid to accounts held by foreign persons to include similar non-U.S. source payments, and provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of such other information that is necessary to enable the IRS to facilitate FATCA implementation by exchanging similar information with cooperative foreign governments in appropriate circumstances. The proposal would be effective for returns required to be filed after December 31, 2015.
http://www.whitehouse.gov/omb/budget/Analytical_Perspectives
Congressional opposition to this FATCA IGA enabling legislation is strong. I fail to understand how the Canadian government can allow the information on just one Canadian be passed to the IRS when a significant legislative obstacle continues to frustrate the purpose of the agreement, that is the reciprocal flow of information between the two countries as per the agreement.
You also tout the IGA exemptions of various Canadian tax-deferred savings accounts in Canada from FATCA reporting as of benefit to Canadians. Because the majority of these accounts are still taxable by the US, how can this be of benefit to anyone other than the banks, unless your government is promoting US tax evasion as a remedy to the problems created by the FATCA IGA? It should be left to individual Canadians whether they choose to be US tax compliant, not to have the Canadian government on one hand turn their private financial information over the the IRS and on the other tell Canadians that they are protected by the Canada-US Tax Treaty and the FATCA IGA. The Canadian government’s duplicitousness in their message should not bode well with either Canadians and the US government.
Also, would you please investigate whether FATCA complies with NAFTA or not?
I would appreciate your response to these questions.
Yours truly,
[Name withheld]”
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Write to YOUR MP’s. Tell them grow some.
Allison Christians’ comparison table is simply incredible in how it drives home the inequities. IMO it should accompany any correspondence with MPs, journalists, etc to indicate how Canada was hoodwinked.
Also, IMO when corresponding with MPs we should not talk about (lack of) “reciprocity”, but rather (lack of) “symmetrical reciprocity”, “symmetrical flows of information”, “symmetrical obligations”, “symmetrical penalties” (and emphasize “symmetrical”!). Don’t give them an opportunity to hide behind the meaning of “reciprocity”.
@nervousinvestor
So was his wife, and he lived in the US for an extended period of time himself. Maybe all targets, but like Boris, I think they won’t be publicly pursued.
@tdott please provide link for comparison table.
@tdott
Good suggestion. “Equitable” may also be a good word to use.
@JC it was in a previous post by Shovel in this thread:
@ tdott
Thanks for reminding us about that Christians-Cockfield submission. Indeed a ratio of 17:2 shows very clearly that the “reciprocity” is very asymmetrical.
@nervousinvestor: a newspaper report from back then seems to say she was treated as relinquishing, instead of renouncing. Not sure if she ever got State Department documentation to prove that fact to her offshore money-laundering Jordanian bank.
http://news.google.com/newspapers?id=7tBKAAAAIBAJ&sjid=uukMAAAAIBAJ&pg=1039,7210127
In contrast, Princess Grace of Monaco was ruled by the State Department to have retained U.S. citizenship and infected her son with it, against the explicit wishes of the boy’s father:
http://news.google.com/newspapers?id=fKwpAAAAIBAJ&sjid=5vYDAAAAIBAJ&pg=4383,4662205
@tdott
Professor Christians can add being scrutinized whether you’re a US person or not when opening a bank account to her list of inequities.
@Eric – Thank you for those links. How very interesting.
from Last year
“Feb 5 (Reuters) – Texas and Florida bankers’ groups are appealing the dismissal of a lawsuit they brought last year challenging rules meant to help the government implement the Foreign Account Tax Compliance Act (FATCA), a law aimed at combating offshore tax evasion.”
I know that under British common law you can not make a legal challenge, until it is approved by government.
If Obama is allowed to grant illegal aliens work permit (eventually citizen and voters) his Treasury department is allowed to implement FATCA which was approved by congress.
http://www.reuters.com/article/2014/02/05/usa-tax-bankers-idUSL2N0LA0SY20140205
Unless Republican repeal the law it can be implemented. Even with a Republican President you need 60 votes in senate to prevent Filibuster. unlikely to happen.
Ask Dash?
@embee, @tdott, @bubblebustin, et al.
The main point from Christians & Cockfield’s Tables:
Before the IGA, Canada and the U.S. had identical reporting obligations (Table One);
Adoption of the IGA destroys the equality, introducing huge inequality in reporting obligations (Table Two).
tdott is on the right track. “Reciprocal” must be confronted as a smokescreen weasel word, contrived by communications staff to hide the ugly underlying inequality.
The Liberal Party reply (referring to FACTA, can’t even get that right) to my correspondence:
I still have no idea of their plan of implementing
and don’t have the words of the Liberal Party Leader on this subject because he apparently doesn’t have the intestinal fortitude to touch it.
He’s too busy welcoming Conservative defectors and supporting the loss of our privacy rights, Calgary411.
Sounds like Joe Holland’s saying that they aren’t going to stand up for Canadians until they’re in power, doesn’t it? We still have yet to receive a response from the Liberal Party after a few of us sent them our suggestions for a policy statement at my riding’s Liberal nominee, Pam Goldsmith-Jones’s urging.
Typical *political* talk wouldn’t you say, bubblebustin?
Regarding reciprocity – everyone seems to be concentrating on the fact that US banks are not having to do same kind of work bring asked of Canadian Banks to pull out lists of accounts held by residents of Canada. However, it seems to me the IRS has an ‘advantage’ of sorts in that because of CBT it already has on file tax returns for ‘US persons’ residing in Canada (those who file), with corresponding US bank account info, and can easily create their list for CRA from this data without needing info from US banks. Admitedly not full reciprocity though.
@Adrien
I’m not sure what you mean by “corresponding US bank account info”.
@Bubblebustin
IMHO, Adrien is spot on. Time to increase the deviousness in one’s thinking to match the level of the IRS!
Let’s say Jane is a USC, resident in France. Jane files a 1040 with the IRS and lists bank accounts in both France and the US on Schedule B (required). The 1040, of course, has an SSN/TIN. The IRS matches the identifier with 1099 information from the US FI’s ($10 threshold), which also is listed by SSN/TIN. They then send the US FI account info to the French tax people, including Jane’s French address as an identifier. France taxes residents on world wide income. Did Jane include her US accounts on the French return? Probably, but the IRS can now claim to have provided reciprocal information to France.
In other words, the IRS “could be” participating in reciprocity by grassing (UK jargon) on USC’s abroad. Is it legal to do without the US FI informing Jane? Hmmm……
A little smoke and mirrors perhaps? It’s still not reciprocity under FATCA, per se. I guess other nations won’t know the difference would they?
Good point, Adrien. I like devious minds.
Well for those of us with elderly parents who have their names on US bank accounts even though these accounts are not ours but family accounts…this is very bad news.
Humpty Dumpty tells Alice:
* “When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master – – that’s all.”
(Through the Looking Glass, Chapter 6 http://www.alice-in-wonderland.net/resources/chapters-script/through-the-looking-glass/chapter-6/ )”
http://www.alice-in-wonderland.net/resources/chapters-script/alice-in-wonderland-quotes/
In the same vein as Humpty Dumpty in *Alice in Wonderland, words mean whatever the US IRS (and the Canadian CRA and Con government) say they mean in FATCA speak. “Reciprocity” is left undefined.
There is no evidence that the US is to send any more types of information to Canada currently than it already was sending under the terms of the Canada US Tax treaty BEFORE the FATCA IGA. We know that equivalent ‘reciprocity’ did not exist and neither did the US Treasury have the authority to bind US banks and FIs to collect and provide it.
So, it may very well be that every time we hear the Harper government FATCAnatics rationalize selling Canadians down the river south to the US Treasury by stating that somehow there is a FATCA benefit specifically to the CRA, we need to know whether they are lying by omission, in neglecting to acknowledge that the information they are to receive currently is the very same info they would have gotten without the IGA – unless they are saying that the US would renege on the already pre-existing arrangement under the Canada US tax treaty. The Respondents said in opposing the injunction:
“Impacts on Canada if the injunction is granted
17. The IGA not only requires the CRA to provide information to the IRS, but for the
IRS to provide information to the CRA. If an injunction is granted and the CRA is not
able to meet its commitments under the IGA, the IRS will not provide the CRA with the
information it has committed to provide. This would have a detrimental impact on the
CRA’ s tax compliance work. The information to be provided by the IRS is helpful to tax
compliance work in Canada because it would quickly and easily permit the CRA to
match financial holdings in the US to specific taxpayers in Canada to, in a timely way,……”…………
Affidavit of S. Murray at para. 8.
RESPONDENTS’ WRITTEN REPRESENTATIONS, page 4
https://adcsovereignty.files.wordpress.com/2015/09/2015-09-25-respondents-written-representation_injunctionpartone.pdf
We know that the US Treasury did not have the authority to force US banks to collect and to provide the same type of information that it is demanding of Canada. So, what did the US send, if anything at all? What did Canada receive? Is it only the very same type and amount of information that it would have received without the FATCA IGA? If so, the government of Canada claim that an injunction would cause injury to the CRA receiving info from the IRS is bunk – unless they mean that the US wouldn’t even send what it had been sending previous to the IGA’s existence.
In a similar vein, this article says:
“Despite yesterday’s chest-beating by the IRS, one is left to wonder just how many countries actually forwarded information to the IRS by the September 30 deadline. My guess is that not too many did. This is bolstered by IRS’s issuance in mid-September of Notice 2015-66 which relaxed the nail-biting deadline for certain jurisdictions having a Model 1 IGA. “……….”
……”Which countries have sent information to the IRS pursuant to an IGA? We know that Australia has now done so, sending over FATCA information on September 23, and we know that the Federal Court of Canada just ruled FATCA information can be sent without being in violation of Canada’s sovereign charter or the US-Canada Tax Treaty (although I cannot find that Canada has definitively sent the information). Short of these two countries, I’ve not heard of any others. While the UK has just signed a Competent Authority Arrangement (CAA) with the IRS, I cannot find that it has sent FATCA information to the IRS. Read the text of the CAA with the United Kingdom here.”……
……….
“…It should be noted that the information is limited to deposit interest information collected on certain nonresident alien individuals under Treasury Regulations §§1.6049-8(a) and 1.6049-4(b)(5),.”….
http://blogs.angloinfo.com/us-tax/2015/10/03/is-fatca-really-baring-its-teeth-reciprocal-automatic-exchange-of-tax-information/
Is FATCA Really Baring Its Teeth? Reciprocal Automatic Exchange of Tax Information
October 3, 2015
When I say above that; “We know that equivalent ‘reciprocity’ did not exist and neither did the US Treasury have the authority to bind US banks and FIs to collect and provide it.” , I am referring to the fact that though under the pre-existing Canada US tax treaty; the US was sending info to Canada on the US accounts held by Canadian RESIDENTS, and Canada was sending the US info on Canadian sited accounts held by US RESIDENTS, there has been no equivalent reciprocal FATCA info being collected by US banks and FIs and non-FIs and so the US will not be sending ‘equivalent’ ‘reciprocal’ info. under the FATCA IGA this year – and perhaps never. The US was not forcing US banks to collect and remit info on the mere existence of US bank and other financial accounts held by Canadian citizens unless they were Canadian residents. And, the banks weren’t collecting info on accts that were not generating interest over 10. And, the definitions of reportable accounts under FATCA is far far broader than mere bank accounts. It includes certain types of life insurance, etc.
@badger
Agree with your synopsis. Possibly the largest change is the availability for USFI’s of obtaining a GIIN (Global Intermediary Identification Number) which would place what was normally previously reported into a FATCA context.
A quick search on the GIIN site shows 922 USFI’s now have a GIIN.
http://apps.irs.gov/app/fatcaFfiList/flu.jsf
Most are funds, insurance companies, etc.
In terms of US commercial banks, a search on google of course reveals no requirements for US banks to report on individuals with standard accounts. There was the initiative released on 30 July 2014 to change the requirements for BSA to include increased diligence, but nothing has come of it, and I believe it has been put on a back burner due to “budget constraints”.
http://blogs.angloinfo.com/us-tax/2014/08/07/us-banks-with-foreign-clients-update-on-reciprocal-fatca-reporting/
For what it’s worth, as of Q2 of 2015 there are 5,441 separate commercial banks in the US according to the St. Louis Federal Reserve. There certainly aren’t that many GIIN’s for USFI’s.
https://research.stlouisfed.org/fred2/series/USNUM
@ badger
So if I understand your point and referenced article, then using Jane’s situation in OAP’s example above (Jane is a USC residing in France whose tax filing with the IRS lists her US accounts), I infer that the IRS cannot automatically exchange her US account data with the French tax authorities specifically because she is not a ‘Nonresident Alien’ (as specified under Treasury Regulations §§1.6049-8(a) and 1.6049-4(b)(5). The implication then is that the IRS, for the moment under FATCA, can automatically exchange only account data for Nonresident Aliens (ie non-US persons). Is this correct?
resident in France. Jane files a 1040 with the IRS and lists bank accounts in both France and the US on Schedule B (required). The 1040, of course, has an SSN/TIN. The IRS matches the identifier with 1099 information from the US FI’s ($10 threshold), which also is listed by SSN/TIN. They then send the US FI account info to the French tax people, including Jane’s French address as an identifier. France taxes residents on world wide income. Did Jane include her US accounts on the French return?
@OAP, thank you for those details. I’m not very well versed in that aspect of things. I see that the article says “…Under current law, US financial institutions are not required to gather as much information about their non-US clients as is required for foreign financial institutions under FATCA who must report about their US clients to the US government….”, but I wasn’t sure if the Texas and Florida Bankers Associations were mounting any further challenges to even report at all on the existence of NON-interest bearing accts (defined as accts with less than $10. per yr. interest? ) owned by ‘foreign depositors’ ( re https://www.texasbankers.com/TABC/TABCNews/Florida_and_Texas_Bankers_Associations_to_Continue_Efforts_to_Protect_Foreign_Depositors.aspx ), or had abandoned pursuing it further in the courts after they lost initially ( http://www.cadc.uscourts.gov/internet/opinions.nsf/D721EA0BE95BBED585257EA10052EDE5/$file/14-5036-1567856.pdf ?) .
@adrien, I am not familiar with the France US tax treaty or French tax and reporting requirements, so cannot usefully comment. I think France already had a requirement that French citizens report to the French tax authorities on ‘foreign’ – i.e. non-French accts? But I don’t know if French residents have to report only the taxable INTEREST earned by any ‘foreign’ accts or provide additional details to the French authorities to also identify the existence of the ‘foreign’ acct. and identifying details (ex. acct no, location, end of year or highest balance, etc.) as well? I am not sure. This blog http://thefranco-americanflophouse.blogspot.ca/ provided several series of posts about the French situation with FATCA and US CBT, including a review post from 2011 (which hasn’t been updated) http://thefranco-americanflophouse.blogspot.ca/2013/11/a-review-of-franceus-fatca-iga.html . There are several others there which talk about what France requires re income tax reporting and banking.
@all,
I remember reading that Canada already had the most extensive tax treaty with the US and exchange of information – PRIOR to the FATCA IGA. So my point was that re the Canadian defendants’ statement (cited above) that; “..If an injunction is granted and the CRA is not able to meet its commitments under the IGA, the IRS will not provide the CRA with the information it has committed to provide…” is very vague and perhaps thereby meant to obfuscate.
Could the statement above be interpreted as saying that the IRS may not then provide the CRA with the already agreed to type and scope of information that had routinely been exchanged for years prior, under the pre-existing tax treaty arrangement before the IGA? Which might mean that the defendants are saying that the IRS would act as if it was now ALL or NOTHING from the US side – i.e. that either Canada provides what it already was providing PLUS the new info demanded by the US under the terms of the FATCA IGA, OR, the US would provide not even what it had been collecting and remitting to Canada in the past.
The CRA and the defendants have no reason to clarify, because it is in their interest to pretend that the agreement was ‘voluntary’ between two equal sovereign governments, rather than the result of US threats to wield FATCA as a bludgeon and weapon to those countries that didn’t surrender. Any clarification is likely to make the IGA deal even more clearly lopsided and extortionate.
To summarize, the IRS is suspected of not giving Canada under FATCA anything we didn’t have without it?