NB: Please note that neither I nor any member of ADCS-ADSC, ADCT, or the Isaac Brock Society Committee support any political candidate mentioned in this article or its description. I am posting it because it contains important information about international efforts against FATCA. If you have any issues with this post, kindly contact the Brock Committee. Please avoid divisive, attacking comments. Thank you.
reposted in its entirety with permission of the author
Now That It’s Clear the U.S. Will Not ‘Reciprocate’ on FATCA, Will ‘Partner’ Countries Wise Up?
As I have warned for several years now (for example, see with respect to Europe, Canada, and Cayman), “partner” governments signing legally defective “Foreign Account Tax Compliance Act” (FATCA) “intergovernmental agreements” (IGAs) under “promises” from the U.S. Treasury Department that the U.S. would provide reciprocal information from domestic American institutions was at best a long shot, more likely just a deception. Almost three years ago, in July 2013, Florida Congressman Bill Posey made it clear requests for legislative authority to provide “reciprocity” were dead on arrival.
Yet foreign governments have continued to deceive themselves – or their publics, or both – that American participation in a global GATCA, or intergovernmental “automatic exchange of information” (AEOI), “disclosure of corporate beneficial ownership,” and a “common reporting standards” (CRS) regime, probably under OECD auspices, were just around the corner . . .
Well, it isn’t. Period. Full stop.
With Senators Rand Paul’s and Mike Lee’s stalwart block of tax treaty provisions as backdoor mechanisms for securing the Obama Administration’s sought-for authority, the matter is deader than ever here in Washington. (See “Rand Paul’s Stand against Tax Treaties Is More Important than You Think,” Accounting Today, May 13, 2016; and “Why Is the Senate GOP Leadership Helping Obama Pass Job-Killing Treaties?” Conservative Review, June 16, 2016.)
Belatedly, some elements abroad are waking up to the fact they’ve been had. They have only themselves to blame, really. Not only were they warned by this writer time and again, they at least should have had the common sense (and an elementary understanding of our non-parliamentary Constitutional system) to know that Treasury’s promises had no legal authority and were worthless. But so intimidated were they by America’s mighty threat of FATCA sanctions (which now seem ready to be unleashed, with the expiration of a two-year “grace period”), or deceived by the siren-song of the compliance industry that “there is no alternative” to an inevitable (and for the industry, highly lucrative) acquiescence to Washington’s demands, or perhaps slavering with the sheer greedy lust of an expected tax revenue bonanza (a mirage, of course) if only they would throw their citizens’ privacy concerns under the bus, our so-called “partners” – more properly called satellites – meekly handed over the keys of their financial institutions to the IRS (not to mention, to the NSA, CIA, etc.)
But still, our “partners” now pronounce themselves shocked – shocked! – that “the Yanks” aren’t keeping their promises. Since the “Panama Papers” story broke, foreign officials have accused Delaware, Nevada, and Wyoming not to disclose “beneficial ownership” of corporations. There have been calls to blacklist the United States, and even (from the Greens/EFA group in the European Parliament) to apply sanctions against us. Cayman Premier Alden McLaughlin has called for a level playing field in terms of financial transparency and stated that a standard without U.S. participation “is not a global standard.”
Good luck with that.
At this point, as our foreign partners finally notice the raw deal they’ve gotten, they have three choices:
1. Keep beating their collective heads against the wall, futilely demanding that IGA reciprocity promises be honored, that American states disclose “beneficial ownership,” that the U.S. sign on to the so-called “Protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters,” along with a follow-up “Competent Authority” agreement, etc. To which Congress in effect answers: “Yeah, you and what army?”
2. Accept that Washington will treat international information exchange like we treated the League of Nations or the International Criminal Court: those lesser, not-fully-sovereign countries will comply with whatever we dictate to them, and we will ignore their requests to us. Have a nice day!
3. Finally admit to themselves that FATCA, GATCA, AEOI, CRS, and the rest of the whole rotten OECD-Obama scheme was a bad idea to start with. They must then tell Treasury they will not comply with FATCA and will pull out of arrangements that violate state sovereignty and personal privacy – and if Treasury does attempt to impose illegal sanctions for FATCA non-compliance, determined resistance and asymmetrical responses will follow. (Granted, small countries like, say, Cayman, are in a weak position to defend themselves directly, though they could support anti-FATCA efforts inside the United States, which they haven’t. Other countries do have significant options. For example, Canada and the United Kingdom are in a strong enough financial relationship vis-à-vis the U.S. to tell Treasury that any FATCA “withholding” to their institutions will be met dollar-for-dollar with withholding from transfers to the U.S. Or Canada could inform the U.S. that an equal sum of FATCA withholding would be imposed in added fees on American air carriers transiting Canadian airspace on Atlantic flights. Let’s get creative, people!)
The bottom line is this: if there’s a will to resist, the means will be found. But if “partners” continue to cower as they have thus far, they deserve whatever they get. Based on past performance I remain skeptical that our satellites will summon the wherewithal actually to stand up for themselves. But the successful Brexit vote gives even this most hardened cynic pause and renewed hope in the spirit of liberty.
Meanwhile, at least the sense unfairness and the need to do something about it appear to be growing. The following is a survey by country of reactions to the accurate perception that FATCA is an unfair, one-way street, especially for “Accidental Americans,” who are local citizens who for a variety of reasons are considered “U.S. Persons” for tax purposes by the U.S. (Edited below, the source is Jude Ryan on the Accidental Americans group on Facebook, where the original text and further details are available.)
France: The Assemblée Nationale has set up a fact-finding mission to investigate the extraterritorial reach of U.S. laws and in particular the invidious position French “Accidental Americans” find themselves in. Several recent events have highlighted the propensity of the U.S. courts and the US administration to purport to impose sanctions against foreign corporations and foreign individuals in respect of events occurring outside of US territory. Based on the feedback of a wide array of experts, the fact finding mission will attempt to define the contours of US extraterritoriality, exhaustively identify all cases of extraterritorial application of US laws, assess their impact and in particular their impact on fair competition and the economic losses suffered by French companies as a result, and to study ways in which to counter such practices both at a national and European level. The mission hopes that its findings will lead to concrete implementation measures. A hearing of French “Accidental Americans” was held on 8 June 2016 and at which issues raised by FATCA and the US practices of Citizenship Based Taxation, particularly as regards “Accidental Americans” were discussed. The mission questioned and heard testimony from five accidental Americans. Also, French Parliamentarian Seybah Dagoma wrote to the President Hollande’s office drawing his attention to the issues faced by French citizens who are also Accidental Americans. In her letter, Ms.Dagoma denounced the unintended consequences of FATCA, the absurdity of Citizenship Based Taxation, the extraterritorial reach of U.S. laws and the living nightmare French Accidental Americans and their families are enduring.
Italy: Massimiliano Fedriga, leader of the parliamentary Lega Nord group recently posed a question to the Italian government regarding the situation of Accidental Americans and in particular how the Italian government proposes to safeguard Italian citizens caught up in this mess (in addition to questions regarding infringement of Italian sovereignty, compliance costs and related matters). Senator Comarloi for the Lega Nord is apprised of the situation and is also looking into this and Matteo Salvini (member of the Lega Nord and fellow MEP) has also been informed of the issues.
Canada: In Canada, the Alliance for the Defence of Canadian Sovereignty has initiated a lawsuit against the Government of Canada legislation that enables the FATCA IGA “agreement” between Canada and the United States. The Defendants in the lawsuit are Canada’s Attorney General and Revenue Minister. The Plaintiffs are two women from Ontario, Canada, both born in the United States, but who left the United States at an early age and have no meaningful ties with United States — yet they are deemed by the United States to be “tax citizens”. The Plaintiffs Claim that the legislation violates Canada’s Charter of Rights and Freedoms, Constitution, and it sovereignty as a nation. The trial is likely to take place in Canada Federal Court later in 2016. Plans are also afoot to mount a legal challenge in the US courts to the US practice of Citizenship Based Taxation.
Israel: Two actions are ongoing in Israel. The first is an appeal to Israel’s Supreme Court, contesting the right of banks to transfer information pertaining to local accounts of dual citizens to the IRS. If this appeal is successful, the problems of accidentals will also be solved. The second revolves around banking problems faced by the many small charities popular in Israel’s ultra-Orthodox communities. These charities rely on foreign donations. Requiring them to report on all donators will effectively ruin them. This issue is being discussed by the finance committee in the Israeli parliament. This committee also promised to discuss the Accidental Americans issue.
It still remains to be seen where these efforts will amount to anything serious. Likewise, even if they are, it is essential they are directed not towards pulling the U.S. into the financial fishbowl – which I repeat again for the record, just will not happen – but for scuttling it entirely. In that regard, it’s belatedly time to create what never has existed from the time FATCA was launched in 2010: a dedicated, funded Washington-based lobby and media effort to repeal this misbegotten, wasteful, invasive, and dysfunctional law.
Jim Jatras, [email him] is a former US diplomat and foreign policy adviser to the Senate GOP leadership.He is a supporter of Donald Trump. Jatras comments on financial and foreign policy topics and on U.S. politics in his publication www.RepealFATCA.com and www.jimjatras.com. Tweet him at @JimJatras.
Considering that countries have to bear the cost of developing and maintaining the infrastructure needed to exchange information with the United States and a vital component calls for reciprocity of information exchange. I would think that at the very least, this should be putting a real strain on Fatca’s future and countries should be asking serous questions about this and asking for a refund for the cost of these systems.
The due diligence cost is borne by the individual FIs – not by the local tax authority.
Not sure where to put these but here are some interesting developments. What next?
“Beginning in 2017, the US will stop treating a country as if it has FATCA intergovernmental agreement (IGA) “in effect” if the country does not adequately prove that it has a plan to actually put the IGA agreement into effect, the IRS has announced.”
“An offshore bank in Belize, owned by prominent UK businessman Lord Ashcroft, has seen a sharp outflow of deposits following a US crackdown on tax evasion.”
It doesn’t seem to be getting any better.
@PatCanadian – “http://mnetax.com/us-threatens-stop-treating-fatca-igas-effect-2017-16372
“Beginning in 2017, the US will stop treating a country as if it has FATCA intergovernmental agreement (IGA) “in effect” if the country does not adequately prove that it has a plan to actually put the IGA agreement into effect, the IRS has announced.”
I wonder if this would apply to Canada, should the Canadian IGA be shot down by the Charter lawsuit.
The Canadian government would presumably be anxious to find a quick interim solution so that the banks would continue to be protected from withholding while longer term options were considered and renegotiated.
“I wonder if this would apply to Canada, should the Canadian IGA be shot down by the Charter lawsuit.”
Very good point. The US government and IRS are very good at threatening but the USA debt is so enormous. One has to wonder how the Canadian government might handle a win with our lawsuit. Though I certainly hope we win as there seems no other option of standing up to FATCA.
It’s worth bearing in mind that just as the Republican platform doesn’t promise FATCA repeal, the MODEL 1 “reciprocal” IGA does not commit the US to reciprocity.
The UK IGA says:
It’s easy to “advocate and support” reciprocity, just as it’s easy to “call for” FATCA repeal. Neither position commits anyone to making anything happen, or even making a serious effort.
@Pat Canadian – yes, I hope so too.
Thank you sir may I have another.
Unlike other commenters today, I fail to see the humour in your CATCA scene.Kindly refrain from inserting my name again in an article where you tell Canadians how to conduct themselves.
I have been subject too often to mansplaining and now today to Homelander splaining. Thus, I have lost my sense of humour.
I take very seriously as an individual and a lawyer, having my name associated with our Canadian law suit. I live and breathe this law suit 24/7, much to the dismay of some of my family and friends.
I take no position on US political presidential candidates or elections. I leave that to Americans.
Btw, I am not who you described here: “when the US repeals FATCA and relents on its insulting treatment of visiting dual-nationals like Boris Johnson and Ginny Hillis…
I am neither a visitor nor a dual national, I am a Canadian citizen plaintiff who very much takes that role seriously.
CATCA may exist in your dream world. I am however a pragmatic and a retired litigation lawyer who looks for real life practical solutions and legal remedies with respect to any law suit.
If you are serious about working towards repealing FATCA, I suggest you have your own work cut out on your own turf. Let me know how that goes.
I do not advocate lobbying the US, as my focus is solely in Canada. That’s your job and cause if I understand your interests correctly.
Canadian citizens are not incapable of standing up to our own government as our law suit will demonstrate. Stay tuned, Jim.
I am no longer feeling comfortable with the recent change in tone here particularly in the last week. I don’t recall there being a requirement to provide one’s CV or identity to Petros before one’s comments can be taken at face value before being labelled as a condor. Nor am I comfortable with long time supporters feeling no longer valued after expressing their views. I can appreciate a good discussion and different points of view absent those things.
As mentioned there is a different sandbox I can hang out in although it seems on hiatus for the summer months at present.
I will take my cue from that. Anyone wanting to contact me either has my email address or can request it from the mods.
Until there is an announcement on the status of the law suit, this is me exiting stage left.
Big public protest on parliament hill in Ottawa with lots of media attention … Yeah, in our dreams. Even though there are one million of us, we barely got a dozen when we tried it the last time.
Yahoo! The fantasy of taking it public has died. RIP in the tomb of the unknown solidaritators. The anony-mouses now revel in reveries of re-belling the FA-cat with with a clanging lawsuit choker.
(Don’t CATch the allusion? Spoiler: https://en.wikipedia.org/wiki/Belling_the_cat)
Even so, BC Doc simultaneously rhetorizes nostalgic:
When African Americans fought for their civil rights in the 50s and 60s, did they hire lobbyists?
Yo!Ho!Ho! Burning cities and bullet-riddled Black Panthers. The legacy of a real resistance …
a resistance that has brought USA forward to Trayvon Martin etc etc etc
Land of the flee and moan of the grave!
[ Enter stage left – caparisoned perhaps in a birthday SUIT ]
@Ginny et al: I apologize to all if I have come across as grumpy these past few days. I know the change in tone here over the past several days has made me feel grumpy. I am also sad/sorry to see George who I respect and have learned so much from feeling put off by one of the recent posts. That said, like Ginny, I have been put off by Jim Jatras’ posts here, though likely for different reasons– to me, his presence here with his background as a Republican lobbyist and Trump campaigner seems self-serving.
@USX– As a physician, I was thinking more along the lines of MLK/peaceful resistance– I am not a fan of violence. My point in any case was you and I shouldn’t have to pay for our basic human rights (eg, poll taxes, $2350USD fees to formally walk away from the US, accountant fees to file zero owed returns if you want to retain your birthright, and certainly not fees to an inside the Beltway lobbyist who will whisper sweet nothings in the ears of Washington politicians),
I think that we must sadly accept the fact that Canada as well as the countries of Europe are vassal states of the U.S. Government. Our foreign policy and our military are controlled by them. Think all NATO countries. Canada (and Europe) will eventually accede to anything the US government demands. This is the hard reality. The U.S. government is determined to have “full spectrum dominance” of the world!
I offer my sincere and abject apology for your name appearing in the “CATCA” concept and for the inaccurate description of your status. As I mentioned when I posted it, CATCA is not my concept but rather a suggestion I had received from a correspondent. I posted it “as is,” without reading it carefully, as an example of how Canada could consider fighting back in the unlikely even Ottawa would ever decide to do so. If I had scrubbed it properly, I hope I would have had the good sense to delete your name and the (inaccurate) description of you. If there is any way the Brock webmaster can remove your name, I request that that be done.
Again, I am very sorry for this slip-up on my part.
I should point out “I” for whatever its worth was the original creator of Jim’s “CATCA” idea. In fact my idea was “worse” as it would subject certain IRS officials to humiliating public strip searches prior to flying over Canadian Airspace. For example when the head of FATCA for IRS compliance wants to fly on United Airlines from DC Dulles Airport to Paris to visit OECD Fiscal Affairs Council to discuss OECD GATCA program United would be forced by Canadian law to conduct a very public strip search of the IRS LB&I Commissioner(in charge of FATCA) prior to boarding in the gate area at Dulles or have the entire flight avoid Canadian Airspace at the cost of tens of thousands of dollars. Just like the Canadian banks have been quite willing to throw “US Persons” under the bus I suspect United would be quite willing to humiliate a very small portion of the passengers in order to keep the cost savings of “complying” with Canadian law.
Unlike Jim though I am a Canadian citizen one perhaps though that lived too many years in the US and picked Americans mean and nasty streak.
Second while all this seems kind of mean if you actually have met pro FATCA-ites like myself, John Richardson, Stephen Kish, J Jatras, Petros, and many others here have you will realize they are some of biggest assholes in the world. These people have been spoon fed the greatness of the American legal system since there first day in law school.
@Ginny my friend, just as ‘sweet’ in real life as at Brock, I would love to come play with you in the sandbox. 🙂
@Brockers and Canadian Ginny
If you want to someone else to get mad at besides myself or Jim you can find it in the person of Phillip Cross from CEO of Statistic Canada who just published an inflammatory article in the National Post. Cross unlike myself or Jim Jatras is actually a Canadian citizen currently living in Canada. I suspect he is article will not be well liked here at Brock.
This mood exploded in the 1960s with the inflow of an estimated 100,000 draft dodgers and deserters from the U.S., many of whom quickly became active in academia and the media. Dinesh D’Souza in his biography of Ronald Reagan, describes these youths as “self-centred and narcissistic … (they) didn’t want the Vietnam war to interrupt their lifestyles of sex, drugs, and rock and roll and so they ducked the draft or ran away to Canada.” Think D’Souza is exaggerating? A few years ago, one senior manager at Statistics Canada, was fawningly profiled in The New York Times as a onetime “peacenik” who did “a lot of acid” before fleeing north from the draft. Not exactly the image everyone’s favourite statistical agency tries to project of itself.
Canada is uniquely placed to help explain the U.S. to the world and even to Americans (judging by the success of our actors, singers and writers in the U.S.) and testify to the benefits of integration with U.S. markets, ideas and innovations. Instead we too often return to the reflexive, unthinking anti-Americanism that is one legacy of allowing droves of draft dodgers to enter our country. The aforementioned New York Times article claimed draft dodgers were an unalloyed benefit to Canada. It is hard to understand how the arrival of a group unified by a hatred of the U.S. and defence spending, a disdain for free markets, and an inability to differentiate between good and evil did anything but distort and lower public discourse in Canada.
Trying to stay positive and put the boots to those who really deserve it. Here’s the letter I wrote to my MP today:
I took matters into my own hands and contacted the Revenue Minister myself as to whether my Canadian banking information has been sent to the IRS via the CRA. Attached is her personal response.
Would you kindly explain to me why you as my MP were unable to accomplish the same, and why you have not contacted me with a progress report on the status of my request?
I am also providing a link below to an article that stresses the importance of Canada reviewing Canada’s Intergovernmental Agreement with the United States in 2017, when it comes up for renewal. Will Canada “wise up”?
Now that it is clear the U.S. will not ‘reciprocate’ on FATCA, will ‘partner’ countries wise up?
I look forward to your response.
Thank you. In the spirit of Full Reciprocity, may I also apologize for failing to note that you were not the original author. I went back to reread the article to see why I drew that incorrect conclusion but unless I am in error once again, I believe that part may now be scrubbed.
I wish you all the best in your efforts in opposing and having FATCA repealed in your country.
@Ginny, I meant that as a compliment in case it was unclear.
Yes, It’s out now. Thanks to the responsible party.
This article claims Democratic Platform is a godsend to Americans abroad:
Several good comments have been posted in refutation. Feel free to add more (agree, if you prefer).
“The lobbying worked: a FATCA reform plank is now included in the [Democratic] party’s platform.” Wotta joke! The Democratic Platform has a milquetoast phrase referring to some vague FATCA relief while lumping expats in with tax dodger, terrorists, and criminals. The GOP Platform has an entire paragraph with *specific* language advocating FATCA *repeal* AND switching to residency-based taxation. There’s no comparison! See details in The National Interest: http://nationalinterest.org/feature/gop-woos-americans-abroad-democrats-tell-them-get-lost-17208
IRS is going after countries that agreed to IGA’s but have not put them into effect. This could lead to an IGA being deemed invalid, and (a) banks in that country will be subject to the 30 percent withholding because they are forbidden to comply with FATCA under local law whilst the local government failed to implement the IGA and (b) each bank being free to register with IRS for a GIIN or not, such that a bank with not ties to USA can simply refuse to register and avoid the expense of compliance.
The Canadian Government would have to allow each bank to register or not with IRS. Also, a bank with substantial USA exposure should be required to register so that the bank won’t be forced to fold due to the 30 percent tax, leading to CDIC payouts. However, banks would reduce their exposure by not investing in USA and the banks with no USA investments would eliminate their compliance costs, expanding their market share due to lower expenses.
I thought Canadian FIs could already not comply if no US involvement? Isn’t that why Credit Unions are alternative to banks in Canada?
As I understand it, in a country with no IGA, banks with US Persons as customer face withholding unless they report (direct to IRS).
If Canada were to end up with no IGA, as a result of the court case, then I should think the banks would just shed their US customers as fast as possible, to avoid bankruptcy. Or if they’re not allowed to do that, perhaps they’ll have to find some other way of staying afloat, such as increased charges, or dropping certain accounts altogether.
But it’s all hypothetical of course.